Currently every person has an inheritance tax threshold of £325,000. Any assets above this amount are taxed at forty percent. The threshold can be transferred between married couples and civil partners giving them a combined threshold of £650,000. This threshold remains frozen at £325,000 per person until the end of the financial year 2020/21.
From April 2017, a Family Home Allowance of £100,000 will be added to the threshold and will increase each year to reach £175,000 in 2020/21. Again, the Family Home Allowance can be transferred between married couples and civil partners giving the Conservatives their figure of £1 million.
To qualify for the Family Home Allowance, the property in question must have been occupied by the deceased as their main home at some point and it must be left to direct descendants such as children, stepchildren and grandchildren.
Therefore if you wanted to leave your property to, for example nieces and nephews, you will not qualify for the Family Home Allowance. There has already been controversy with couples who have no children saying the policy discriminates against them. Similarly, clients who do not own a property when they die, perhaps because they have gone into a nursing home, will not qualify for the Family Home Allowance.
At Bretherton Law we can advise you on inheritance tax planning. The earlier you seek advice, the more you and your family will benefit. We make a complex area of law and financial planning simple and use plain English to make certain you understand any decisions made.