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Passing on the family home - new inheritance tax relief from 6 April 2017

9 March 2017

The new relief from inheritance tax, the “residence nil rate band” applies to deaths on or after 6 April 2017. Put simply, it “tops up” the existing inheritance tax free band of £325,000 (per individual) by £100,000 for deaths in 2017/18, increasing by £25,000 each tax year, to £175,000 by 2020/21. For married couples/civil partners, this means £1m of their combined assets may be free from inheritance tax after 5th April 2020.

There are various conditions which have to be met:

  • the deceased’s descendants, children, stepchildren or grandchildren, must inherit the home or a share of it
  • no relief is available if the deceased's estate is worth over £2m
  • it does not apply to property bought as an investment such as buy-to-let property
  • it only applies on death and not to lifetime gifts
  • for couples, any unused relief may be used against the surviving spouse/civil partner’s estate.

The new rules are complicated, not helped by misreporting in the press! Despite what you might read, this relief is not lost if you have Will Trust arrangements in place as long as the correct advice is taken on death. Life time planning is also key to maximising the use of this relief.

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