Inheritance Tax (IHT) is back in the headlines following an announcement by Conservative leader Kemi Badenoch that a future Conservative government would seek to scrap IHT on the family home and allow couples to leave an additional £1 million tax-free.
But how does this compare with the current rules?
What is the position now?
Currently, each individual has a £325,000 nil-rate band (subject to certain lifetime gifts) before IHT generally becomes payable. An additional residence nil-rate band of up to £175,000 may also be available where a qualifying home passes to direct descendants, such as children or grandchildren.
For married couples and civil partners, unused allowances can potentially be transferred to the surviving spouse or civil partner, meaning a qualifying couple may currently pass on up to £1 million to their descendants free of IHT. However, this is not automatic. The residence nil-rate band comes with conditions and begins to reduce where an estate exceeds £2 million.
IHT is generally charged at 40% on the value exceeding the available allowances.
What is being proposed?
Kemi Badenoch has announced that a future Conservative government would seek to remove the family home from IHT altogether and allow couples to leave an additional £1 million tax-free. If introduced, this could represent a significant change for many families, particularly where the family home makes up a substantial part of their wealth.
For now, however, these are proposals rather than law.
What does this mean for you?
With potential tax changes making headlines, now is a useful time to consider whether your existing Will and estate planning still reflect your circumstances. This is particularly important if the value of your property or other assets has increased, your family circumstances have changed, or your Will has not been reviewed for several years.
At Nockolds, our Estate Planning and Probate team can review your current arrangements, consider your potential Inheritance Tax position and advise on the options available to you.
If you would like to discuss how the current Inheritance Tax rules may affect your estate, speak to us, please get in touch with a member of our team.