Despite the BBC and other news agency headlines announcing the end of inheritance tax following yesterday’s budget, clients should be wary. Contrary to popular belief, this is not the end of inheritance tax for a significant number of people living in the South West.
The additional allowance announced (of the main residence relief) for every individual is only available to set against a main residence when passed on death to a direct descendant. This allowance will initially be limited to £100,000 in 2017-18, increasing to £175,000 by 2020-21.
If your estate has a net-value on death of more than £2million, the additional nil-rate band will reduce by £1 for every £2 over the threshold. To put it simply, if your estate is valued at £2,700,000 you will not benefit from the new additional allowance at all. In addition, you will pay more inheritance tax due to the current nil-rate band of £325,000 per person being fixed until at least 2020-21.
Susannah Bower is a senior solicitor at WBW and is part of the private client team in Exeter and Newton Abbot. She specialises in inheritance tax and estate planning and can be contacted on 01392 666533 or by email firstname.lastname@example.org