A bill which proposes to amend the Inheritance Tax Act 1984 to make transfers between cohabiting siblings exempt from Inheritance Tax (IHT) in certain circumstances is awaiting its second reading in the House of Lords. The Bill will need to go through a committee stage, report stage, and third reading in both the House of Lords and the House of Commons before it can become law. Although there may be a way to go, it is worth considering how this could amend the current legal position.
Currently, if siblings’ cohabit, owning their property jointly, on the death of the first sibling the surviving sibling could be faced with a significant IHT bill. This can sometimes force people to sell their home to pay the IHT liability. However, under the new proposals, the transfer of property between siblings would be exempt from IHT in certain circumstances.
Any siblings (including half-brothers and half-sisters) who have lived in the same property continually for seven years would qualify for an exemption, provided they are over the age of 30. Therefore, the siblings would largely be treated the same as a married couple, or civil partnership and no IHT would be payable on first death.
The amendments aim to relieve the IHT burden on cohabiting siblings when they have lived together for many years. This would hopefully help to make the IHT framework fairer and accommodate for people who do not have a spouse or children to inherit the family home.
If you require any assistance in these matters please contact a member of the team or call on 0191 232 8345 to see how we can help.