MAIN RESIDENCE AND THE INHERITANCE TAX NIL-RATE BAND
A change in line with the last 2 Conservative manifestos is to be introduced although the change is not to commence until 6 April 2017 and will not be fully implemented until 6 April 2020.
An additional inheritance tax (IHT) nil-rate band is to be introduced when a residence is passed on death to direct descendants.
|ADDITIONAL NIL-RATE BANDS|
|ONE SPOUSE||TWO SPOUSES|
Any unused nil-rate band will be transferred to a surviving spouse or civil partner. When added to the £650,000 existing nil-rate band (2 x £325,000) this could provide a total nil-rate band of £1 million for a married couple or civil partners.
From 2021/22 onwards the nil-rate bands will be increased in line with the CPI.
It was also proposed that this new nil-rate band will be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
Final details are subject to a technical consultation. There will also be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
THE IHT NIL-RATE BAND
The government has conirmed that the current nil-rate band remains frozen at £325,000 until April 2021 – previously this was frozen until April 2018.
IHT AND NON-DOMICILES
From April 2017 the point at which a non-domiciled individual is deemed domiciled for IHT purposes will change to 15 out of 20 years.
It is also intended to treat individuals who were born in the UK to parents who are domiciled here, as UK domiciled while they are in the UK.
IHT ON UK RESIDENTIAL PROPERTY OF NON- DOMICILES
From April 2017 IHT will be payable on all UK residential property owned by non-domiciles, including property held indirectly through an offshore structure regardless of their status for tax purposes.
A detailed paper was also published which it is intended to provide a basis for consultation later in 2015.
New rules are to be introduced to target avoidance through the use of multiple trusts as previously announced in Autumn Statement 2014.
Inheritance tax allowance on homes left to children or grandchildren £175K