By Allison Crossman
All good news?
The budget today announced new inheritance tax measures which had previously been heralded as enabling parents to pass £1m on to their children free of inheritance tax. This new main residence nil-rate band is in addition to the inheritance tax band available to every individual which is currently set at £325,000.
Looking at the detail more closely it should be made clear that this measure will take effect for estates where the death occurred on or after 6th April 2017. It will however be transferable so if a second spouse/civil partner dies on or after 6th April 2017 then a claim to transfer the unused inheritance tax band of the first spouse to die can be made. Critically though assets of an equivalent value have to be passed on death to direct descendants.
The introduction of this additional tax free amount is set at £100,000 in 2017-18, with rises of £25K in the next two tax years and then the full amount of £175,000 takes effect in 2020-21. To get the full allowance the advice is stay alive until 2020-21!
It’s not all good news however. For those with estates with a net value of more than £2m, there is a withdrawal rate of £1 for every £2 over this threshold. On top of this the existing nil rate band will remain at £325,000 until the end of 2020-21.
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