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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.

Link: Inheritance Tax: how to apply the additional threshold

For more information, contact Baines Jewitt on 01642 632032

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