Passing on the Family Home

Passing on the Family Home

This year will see changes to the Inheritance Tax threshold for many homeowners.

At present everyone is entitled to pass on £325,000 of wealth tax free, regardless of whether or not they own a property. This is known as the tax-free threshold, or “nil-rate band”. Any assets in an estate above this amount incur an IHT charge of 40pc. Married couples and civil partners are entitled to double the allowance before tax is payable.

From April 2017 the Government is introducing a new, additional tax-free allowance for people who own a home. This is called the Main Residence Nil Rate Band or “family home allowance”. It will eventually be worth an additional £175,000 per person. Added to the £325,000 allowance that everyone gets, this means a new allowance for property owners of £500,000 – or £1m for couples.

This allowance will also be transferable between married couples and civil partners, even if one partner dies before its introduction in 2017.

The new RNRB will be introduced gradually over four years, with the allowance worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20 and £175,000 in 2020-21.

Estates that are worth more than £2m will lose some or all of the family home allowance, which will be tapered at a rate of £1 for every £2 over the £2m threshold.

The existing £325,000 nil-rate band will remain frozen until at least the end of 2020-21.

To qualify for the family home allowance, the property must have been the main residence and has to be left to one or more direct descendants.  

If you would like any clarification on these new rules and how they may affect you, please contact your local Lentells office. We can offer advice on all aspects of Estate Management including making and updating a Will and Probate.