NEW INHERITANCE TAX RULES ANNOUNCED

After press reports that the Nil Rate Band allowance for Inheritance Tax was about to be increased to £1 million for couples who owned a property, the rate has actually been frozen. The rate for individuals will remain at £325,000 for individuals and £650,000 for married couples.

However, in 2017/18 an additional nil rate band will be introduced where a residence is being passed on death to direct descendents such as to children or grandchildren. The additional allowance can only be used in respect of one property, which has at some point been a residence of the person who has died, although there are special rules for people who have downsized or have ceased to own a property after 2015 but still own assets of the equivalent value.

It was anticipated that the new rate would be introduced at a flat rate of £175,000 but this is not the case. The new rate is to be phased in from 2017/18 and will be £100,000 per person in 2017 increasing to £125,000 in 2018/19, £150,000 in 2019/20 and finally £175,000 in 2020/2021.

The announcement states that it will then increase in line with inflation from 2021 onwards.

The rules, whilst more complex than anticipated do give scope for people to do some extra tax planning in their Wills and it is advisable for people over the existing allowance to review and update their Wills.

The announcements on 8 July 2015 will now be subject to a technical consultation and it is anticipated that they will be legislated in the Finance Bill 2016.

DONNA BOTHAMLEY
Wills and Probate Department, Blythe Liggins