New rules for Property Inheritance
New rules for property inheritance means more of the value of your home can be left to your children tax-free.
Following the Tory election pledge to take most family homes out of inheritance tax Chancellor George Osborne announced in his Summer Budget that he would significantly raise the IHT threshold from £325,000 per person to £500,000.
This means that from 2020, married couples and civil partners will be able to pass on up to £1 million of housing wealth to their children or grandchildren without paying any IHT (Inheritance Tax) at all….! The decision has been made due to the buoyant property market in London and the South East sending house values through the roof (terrible pun, sorry!) and leaving many home owners understandably, concerned about the amount of tax their Estate will incur after death.
IHT is payable on death at the eye-watering rate of 40% above the tax-free allowance. This is calculated not only from the value of your property but will include all other assets, ISAs, savings, shares etc now, whilst the majority of most peoples assets fall below the current allowance it was rising property values that were dragging unsuspecting London home owners into the IHT net. It is thought that this move will prevent the number of families paying inheritance tax from doubling over the next five years, and with a tax break for those down sizing built in this is great news all round.
However, for those of us lucky enough to be leaving property and/or assets totalling over £2mil+ things aren’t looking so rosy with the allowance tapering down with none of the extra relief available from £2.35mil (£2.7 for couples). And, for the super wealthy the liability for people leaving £3 million, for example, remains eye-watering at about £1 million.