From April this year, individuals will be given an additional £100,000 Inheritance Tax (IHT) allowance.
This will be added to the existing £325,000 allowance, effectively raising the nil-rate-band to £425,000 per person.
And much like the existing allowance, it can be passed to a surviving husband, wife or civil partner.
The allowance will continue to increase in the years ahead and is set to reach £175,000 by 2020.
However, it only applies when an estate passes to direct heirs. These include biological children, adopted children, stepchildren, and grandchildren.
In addition, for every £2 you pass down to children over £2 million, you will lose £1 of your allowance. This means that an estate owned by a married couple valued at more than £2.4 million will not receive the new allowance.
In addition, buy-to-let homes cannot be included, since the property will not count as a primary residence.
The changes being introduced between now and the end of the decade are expected to take millions of households out of paying IHT altogether, but experts have warned that previous plans to mitigate tax – for example, you may have arranged to move a portion of your house into a trust – may pose difficulties.
To review your tax position, talk to an expert at ELS Legal. We can provide comprehensive tax planning advice relating to corporation tax, income tax, capital gains tax and inheritance tax in order to maximise reliefs.
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