It’s a £1,000,000 inheritance tax exemption

It’s a £1,000,000 inheritance tax exemption Jim, – but not as we know it.

In the July Budget of this year 2015, the Chancellor announced with ‘bells and whistles’ his new inheritance tax (IHT) ‘allowance’ that would bring a married couple’s effective ‘allowance’ to £1,000,000. The technical term for it is the ‘family home allowance’. It is to be worth up to £175,000 per person and when added to the ‘Nil Rate Band’ allowance of £325,000, which we already have, gives a nice round £1,000,000 per couple. It is already running into a headwind of dissatisfaction.

What’s great about it, is that the Chancellor seems at last, to be paying heed to some of the unfairness of the tax upon those whose asset worth has grown as has the market price of their home.

However, to depend upon the ‘allowance’ being brought into law may be a seriously mistaken assumption. It is not simple nor universal.

The first point to remember is, that this ‘allowance’ only affects those with a family home, with children, and only as spouses or civil partners to get the maximum.

The other is, that if it does come into effect, it is to be delivered in stages. The projected start date is 6th April 2017 for the first £100,000 element. This amount will then increase by £25,000 per year until 6th April 2020, when it will be the full £175,000. So, when added to the existing NRB allowance of £325,000 makes £500,000 per individual. A grand £1,000,000 allowance per couple, if things go according to plan.

This means that, if you have an estate which includes you’re your principal residence ( not a second home ) worth £1,000,000; can you risk putting off making a plan today, on the expectation that your full allowance will be £1,000,000 in 2020?

In addition, note that the allowance is selective. It only works if you have children. And, for those couples with estates worth more than £2,000,000, a sliding scale to diminish the ‘family home allowance’ applies. £1 is lost in the ‘allowance’ for every £2 of estate value above £2,000,000. It means that if your combined estate is worth £2,700,000 and over, it will continue to be taxed as on today’s rules. viz. nothing has changed for you.

So consider these proposals with a pinch of salt. Do not depend upon it and risk more than you bargained for. The amount of dissatisfaction about how they affect the other half of the population to favour a few, will surely mean several iterations before they become law. If at all. Remember that increase to £329,000 in the NRB of 5th December 2012, which was rapidly with drawn?

If you want to keep things at their simplest, with flexibility and adaptability, then give us a call on Tel: 0118 9 740 130 or

The above is for your information only and is not be considered as advice. You should consult a qualified adviser before making any decision of a significant financial nature.

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