Every UK estate should automatically qualify for the family home allowance, set to be introduced next year, so don’t worry about mentioning it in your will – but there are some things you can do to help the inheritance process go smoothly.
Currently each individual can leave assets worth £325,000 without being subject to inheritance tax at 40pc. Within a married couple, each individual has the full allowance. If your spouse dies, you have to apply for their unused “nil-rate band”, their allowance, to be transferred to you.
Announced last year, the family home allowance increases the amount that you can leave to direct descendants without being taxed if a main residence is included in your estate.
This will be introduced on an incremental basis from 2017. At first the extra amount will be £100,000, and it will increase by £25,000 each year until it is £175,000 in 2020.
This will work the same way as the existing allowance, and can be transferred on the death of one partner. So a married couple can leave up to £1m to direct descendants, provided it includes a home that they have lived in and own; buy-to-let properties don’t count.
In this case, from next year the family home allowance should mean that you are not subject to IHT, as each partner has a nil-rate band of £325,000, plus £100,000 each for the allowance – making £850,000.
In 99pc of cases it’s clear, but you can signpost things to the executor. It’s not a nice thought, but putting a ‘death pack’ together with your financial information, including the property that should be considered your main home, will make things easier, so let me know if you need help compiling one.
Do YOU (or someone you know) have property in the UK?
Do you know the new rules on Inheritance Tax and property?
If not, please see attached.