Pass on up to £950,000 tax-free in 2019-20
As of 6 April, direct descendants can inherit up to £950,000 completely free of inheritance tax from their parents or grandparents thanks to increases in the residence nil-rate band.
This tax-free allowance on inherited property has risen from £125,000 to £150,000 this year and will rise again next year to £175,000.
In order to qualify for this allowance, an individual must pass on their main home to a direct descendant, such as a child or grandchild.
The residence nil-rate band is layered on top of the existing basic allowance for Inheritance Tax (IHT) of £325,000 per person or £650,000 for a married couple or civil partners.
This means that spouses and civil partners could leave behind up to £950,000 in 2019-20, rising to £1 million from next year.
Where an estate is valued at more than £2 million, the residence nil-rate band will be progressively reduced by £1 for every £2 that the value of the estate exceeds the threshold.
Individuals in England and Wales will normally incur IHT at a rate of 40 per cent on all estates valued over this threshold, so it is worth planning ahead to make sure you minimise any liabilities.
For more information, contact Baines Jewitt on 01642 632032