Next month’s Budget, on November 22, will be one to watch, not least because Inheritance Tax may be on the agenda.
Chancellor Philip Hammond, in his first Budget of the new Parliament, may be tempted to tweak, or even overhaul, the ‘death tax’ which is set at 40% for any part of a deceased person’s estate which is over the threshold.
Changes to Inheritance Tax (IHT) have already come into force this year. From April, the Residence Nil Rate Band was introduced, with the aim of taking the family home out of the scope of IHT, by effectively increasing the threshold for married couples and civil partners to £1 million (or £500,000 per spouse).
But the introduction of the Residence Nil Rate Band (RNRB) is a phased process. Here are the rules as they stand:
For later years, the threshold will go up in line with inflation based on the Consumer Prices Index.
But the Residence Nil Rate Band is not straightforward and there are separate rules governing downsizing, moving into residential care, and second homes. These circumstances are anything but simple and very careful advice is recommended if you fit into any of these categories.
It will be interesting to see if the Chancellor makes any changes to IHT, perhaps by raising the basic threshold. He may also talk about IHT changes to residential property owned (directly or indirectly) by those not domiciled in England and Wales.
In the meantime, there are ways to mitigate the amount of Inheritance Tax paid on an estate by making plans during your lifetime. If you would like help with Inheritance Tax planning, or any other area of probate, please get in touch with the team here at Optimum.