Many businesses have welcomed the news that the Government will introduce a new scheme to…
As of 6 April, direct descendants can inherit up to £950,000 completely free of income 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.