Budget 2015 - What The Inheritance Tax Changes Mean For You
Yesterday, we saw the Chancellor George Osborne announce sweeping changes in his summer budget statement, one of these changes was to something that will affect all of us at some point in our lives – Inheritance Tax.
What Has Changed?
Inheritance Tax (IHT) is the tax paid when we leave our property (money, or gifts) to others once we have died. Currently, if we leave an estate worth over £325,000
, IHT is charged at the rate of 40% on anything over this threshold.
Couples who are married or in a civil partnership can combine their allowance and leave £650,000
together before tax becomes payable.
The Chancellor yesterday announced that from April 2017
, the amount we can leave to our loved ones free of IHT will rise from £325,000
per person to £500,000
. This is called the, 'family home allowance'
and adds an extra £175,000
to an individual's tax free allowance if they are leaving a family home.
This means that people who are married or civil partners can now leave a total of £1 million
to their loved ones, entirely free of tax
when leaving a family home.
Those who hope to downsize also don't need to worry, as people who sell an expensive property are offered an 'inheritance tax credit'
, meaning their relatives can still benefit from the higher threshold.
Tax Break for Many
The changes will bring a welcome tax break for many. Sian Thompson, Partner and Head of Wills and Probate
, comments:"At last the government has implemented a promise it first made over five years ago and is recognising the impact that increased house prices have on estate planning. Your home is usually your most valuable asset and it is important to be able to pass this on to our future generations without it being eroded by a 40% tax."
Sian, who is based in our Leeds office
, explains how the changes will help our clients in future:"Many of my clients start worrying during their retirement as to how they will ensure their wealth stays in their family and this has led to home owners feeling the need to place their property in trust or sell up and downsize. These new measures alleviate that pressure and will enable many more people to stay in their own home for longer."