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If you own a property worth up to £1million you will be able to leave it to your children or grandchildren free from Inheritance Tax (IHT).
The widely anticipated changes to the unpopular tax were made after the Chancellor revealed rising house prices were contributing to nearly double the number of estates facing an IHT bill by 2020-21.
Sean McCann, Chartered Financial Planner at NFU Mutual, said: “The Chancellor’s new rule on Inheritance Tax enabling family homes worth up to £1m to be passed on free from IHT is great news for parents or grandparents who want to pass on as much as they can to the next generation.
“The Chancellor talked of fairness in his Budget but those without children won’t be able to make use of this allowance – even for their favourite niece or nephew.
“The additional amount that can be added to the IHT threshold of £325,000 will be gradually phased in from an extra £100,000 in 2017 to an extra £175,000 in 2020. Meanwhile, anyone with an estate worth more than £2m will see the additional allowance gradually clawed back.
“The devil in the detail here is that the £325,000 threshold, in place since 2009, will be frozen until at least April 2021. Inflation and, in particular, prospective house price increases will erode the true value of this tax break.
“Allowing families to downsize now and still keep their additional allowance will be a relief for those who may have otherwise stayed in large and unsuitable homes to try and minimise their IHT bill.
“We would have preferred to see measures that simplified Inheritance Tax. Supplementing the threshold in this way will be great news for some but not for others and will mean that more people will need to take professional advice to make sure they’re making the most of their money.”
Research carried out on behalf of NFU Mutual over the weekend showed almost half (47%) of people found Inheritance Tax to be the most unfair tax facing people in the UK.
The widely anticipated changes to the unpopular tax were made after the Chancellor revealed rising house prices were contributing to nearly double the number of estates facing an IHT bill by 2020-21.
Sean McCann, Chartered Financial Planner at NFU Mutual, said: “The Chancellor’s new rule on Inheritance Tax enabling family homes worth up to £1m to be passed on free from IHT is great news for parents or grandparents who want to pass on as much as they can to the next generation.
“The Chancellor talked of fairness in his Budget but those without children won’t be able to make use of this allowance – even for their favourite niece or nephew.
“The additional amount that can be added to the IHT threshold of £325,000 will be gradually phased in from an extra £100,000 in 2017 to an extra £175,000 in 2020. Meanwhile, anyone with an estate worth more than £2m will see the additional allowance gradually clawed back.
“The devil in the detail here is that the £325,000 threshold, in place since 2009, will be frozen until at least April 2021. Inflation and, in particular, prospective house price increases will erode the true value of this tax break.
“Allowing families to downsize now and still keep their additional allowance will be a relief for those who may have otherwise stayed in large and unsuitable homes to try and minimise their IHT bill.
“We would have preferred to see measures that simplified Inheritance Tax. Supplementing the threshold in this way will be great news for some but not for others and will mean that more people will need to take professional advice to make sure they’re making the most of their money.”
Research carried out on behalf of NFU Mutual over the weekend showed almost half (47%) of people found Inheritance Tax to be the most unfair tax facing people in the UK.