The Inheritance Tax allowance for married homeowner couples is set to increase to £1 million by 2020. Each parent will be able to leave £500,000 in property – up from the current £325,000 per person – without paying Inheritance Tax. This is great news for the rising number of people whose estates are now falling within the inheritance tax band. The upsurge in house prices have seen swathes of families now facing inheritance tax bills where no long ago it was the reserve of the wealthy. Effective tax planning can serve to minimise, or eliminate any Inheritance Tax liability. At 40%, your loved ones can lose a significant amount of their inheritance to taxes. Speak to one of our solicitors to see if we can help if you think your loved ones’ inheritance may be affected by Inheritance tax.
Inheritance Tax Allowance for Residential Property
The new allowance can be passed from one deceased married partner to the other, which means when the first dies, their £500,000 allowance transfers to the other, giving the survivor a £1 million allowance. The current allowance per person is £325,000 - above this threshold is taxed at 40%. The addition of a new tax-free band, which is to be introduced, per person, on the main residential property will be worth £175,000 per person, making it a £500,000 allowance per person allowance where there is a property involved. This will come into effect in 2020, but it will be introduced gradually, starting this year. The new tax-free 'main residence' band will be set at £100,000 for 2017, and will go up by £25,000 each year till it reaches £175,000 in 2020. This means that in 2017, the amount that can be passed on tax-free is £850,000 as this is made up of the standard £325,000, plus the new £100,000 for the main residence, meaning a total of £425,000 per person. When the first partner dies and this is passed on to the survivor, this takes their allowance to £850,000.
The increased allowance is great news for today’s younger generation, who are finding it harder to accumulate wealth of their own, and harder to purchase their own home because of the current climate.
Andrew Hood, Senior Research Economist at IFS told the Independent:
“The wealth of younger generations looks set to depend more on who their parents are than was the case for older generations. Today’s elderly have much more wealth to leave to their children than their predecessors did, primarily as the result of higher homeownership rates and rising house prices.”
“At the same time, today’s young adults will find it harder to accumulate wealth of their own than previous generations did, due to the sharp fall in homeownership for that group, the dramatic decline of defined benefit pensions in the private sector and the stagnation in their incomes.”
Inheritance Tax Planning
To speak to a solicitor about how you can help minimise Inheritance Tax liability on your estate, get in touch with one of our solicitors, who would be delighted to have a chat with you. We can also assist in retrospectively amending Wills after a person dies in order to mitigate inheritance tax liability.
Wilson and Fish Solicitors are a firm of Scottish solicitors specialising in executry / probate. We are based in Glasgow, and act for clients throughout the whole of Scotland. We also advise solicitors abroad in connection with their clients’ estates based in Scotland. Our lawyers and advisors provide clear and unambiguous advice to help our clients plan for their future. At difficult and painful times following bereavement they provide sympathetic assistance to guide our clients through what can be complicated and sensitive issues.
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