HMRC said in a recent statement “We recognise that more families are being pulled into the inheritance tax net than ever before, with the number set to double over the next five years”
A HM Treasury spokesperson said: “The Government wants families to be able to pass on their home to their children or grandchildren. We recognise that more families are being pulled into the inheritance tax net than ever before, with the number set to double over the next five years.
“That’s why we’re reforming the rules to bring down the number of families paying inheritance tax, with over 30,000 estates taken out of paying inheritance tax in 2020-21 alone. Under the new system families will have a new £175,000 inheritance tax allowance for their home on top of the existing £325,000 threshold – allowing them to pass £1 million onto their children completely free of inheritance tax.”
So how does it work?
From April 2017 a new, higher threshold including a “family home allowance”, will begin to be phased in. This will be worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21.
This means that married couples will be able to pass on estates worth up to £1m to their direct descendants, including a family home.
If you would like further information regarding Inheritance tax and estate planning call us on 01773 599929.