Alice Clewes, Private Capital Partner at Hay & Kilner looks at the outcome of the Summer Budget.
- For homeowners, as widely reported in advance, the Chancellor gave a much-hoped for hike to the threshold at which people pay inheritance tax on the family home.
- A married couple or civil partners will have a combined allowance of £1 million, up from the current level of £650,000, with a resulting saving of inheritance tax of £140,000 at the maximum level.
- A single person will have a £500,000 allowance, up from £325,000, giving a tax saving of up to £70,000.
- People will also be allowed to sell a larger house, but retain the relief from inheritance tax, in a move designed to encourage down-sizing and free up larger properties by older owners.
- Inheritance tax will continue to be charged at a rate of 40% on the value of an estate above the tax-free threshold and the additional allowance is for family homes. It will be introduced at £100,000 in 2017-18, rising by £25,000 in each subsequent year, to reach the £175,000 level in 2020.
- High value estates will not qualify for the additional relief, which will be tapered away for estate values above £2m.
A review of inheritance tax thresholds has been long awaited and this is good news for those who have seen the values of their family homes rise considerably over recent years. They will now have more to pass on to their children.
However as this is going to be a gradual change, those with estates in excess of the current £325,000 per person threshold should still be working with their advisors to see how best to manage and mitigate values. And for those with estates over £2m, the agenda of lifetime gifts and other means continues to be worthy of consideration.
For further information, please contact Alice Clewes, Partner at Hay & Kilner
Call: 0191 232 8345