Budget 8th July 2015 – Inheritance Tax, new main residence Nil-Rate Band

Budget 8th July 2015 – Inheritance Tax, new main residence Nil-Rate Band

The Chancellor announced that the nil-rate band will remain frozen at £325,000 until April 2021. However an additional nil-rate band will be available when a main residence is passed on death to direct decendants*. This new nil-rate band will be £100,000 in 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21. After this it will increase in line with CPI. The new band will be transferable where the second spouse or civil partner of a couple dies after 5th April 2017 regardless of when the first of them died.

The new nil-rate band will be available when a person downsizes or ceases to own a home after 7th July 2015 and assets of an equivalent value, up to the new nil-rate band, are passed on death to their direct decendants (this element will be subject to a technical consultation). For estates with a value of more than £2 million the new nil-rate band will be withdrawn at £1 for every £2 over this threshold.

As usual with such new proposals the Devil will be in the detail in the Finance Bill 2016. As with the Care Cap announced last year will also be subject to postponement or withdrawal.

* direct decendants includes children, step-children, adopted children and foster children and, in each case, their lineal decendants.

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