We used to think of Inheritance Tax as a tax for the wealthy. Nowadays, more and more people are getting caught out due to rising property prices.
In the summer of 2015, after increased pressure to make changes to ‘Britain’s most hated tax’, the then-Chancellor of the Exchequer, George Osborne, announced a new transferable main residence allowance. This meant that some of the value of the main family home is exempt from inheritance tax.
The new rules, which became applicable on 6th April 2017, mean that exemptions of up to £100,000 can be claimed if the residence is left to the children.
This new rule sits on top of the already existing nil rate band of £325,000. This means that the nil-rate threshold can reach up to £425,000.
This can even be increased further when a spouse leaves everything in their will to their other spouse. The surviving spouse will receive their late spouse’s nil rate band, and the main residence allowance.
In all, there is a potential of a £850,000 nil rate threshold – not bad at all!
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