Inheritance Tax Changes July 2015 Summer Budget
Have you prepared your estate to take advantage of the upcoming changes to Inheritance Tax?
The Chancellor presented the second Budget of 2015 on the 8th of July in a speech that set out new inheritance tax changes. Under the proposals, an additional nil rate band for inheritance tax will be made available to UK domiciled individuals, an allowance which has been dubbed the ‘property nil rate band’ (PNRB). The PNRB will be available in addition to the existing nil rate band rate of £325,000 and will apply to a property that passes to direct descendants such as a child or grandchildren. In the tax year 2017/2018 £100,000 will be given as an allowance rising to £125,000 in 2018/2019, £150,000 in 2019/2020 and £175,000 in 2021/2022.
The PNRB can only be used in respect of one residential property which has, at some point, been a residence of the deceased. As with the existing transferable nil rate band, any unused PNRB may be transferred to a surviving spouse or civil partner. This means that spouses may effectively double up their allowance where they own property.
So what happens if I sell my property?
The good news, which deals with the initial concerns that property may need to be retained up to the date of death, is that the new PNRB will still be available where a person downsizes, or ceases to own a home after 8 July 2015 but still hold assets of an equivalent value to the nil rate band that is being passed to direct descendants. The details of exactly how this will be implemented will be included in the Finance Bill 2016 and is likely to be the subject of a technical consultation.
The PNRB will not apply to all estates. The proposals do not benefit individuals who have not owned and been resident of a home at some point during their life or those leaving their estate to anyone other than their direct descendants. In addition to this, for all estates over £2 million the additional nil rate band will be tapered away with a withdrawal rate of £1 for every £2 over the £2million threshold.
What should you do?
While the details of the Finance Bill 2016 are being finalised, and passing through the legislative process, make sure that you have sought our professional legal advice to ensure that you can take advantage of the changes.
It is important regularly to review your Will and to ensure that you have taken professional legal and financial advice. ensuring that you are not missing out on available tax exemptions such as the PNRB.
Ask us about ways of reducing your inheritance tax exposure without losing control of assets.
To speak to an SWLaw legal or financial specialist about your estate visit us at our SWLaw office or call David Kelshall on 01752 205 202 to arrange a home appointment.