Death Duty Exemption was extended to £1Million for couples passing on family homes. But there are limits.
According to the Chancellor, George Osborne, death duty rates are about to be overhauled, with additional Nil Rate Bands upping the tax free allowance for couples passing on the main family home. The changes, announced in the recent budget, do not mean a tax break for all, however.
“It’s a targeted break,” explains Paul Dodsworth of Estate Planning Solutions, one of the UK’s leading estate planning firms. “It’s designed to alleviate some of the misery of families who have, until now, faced sizable death duty bills simply because of rocketing house prices. Something beyond their control.”
The new plans will see the introduction of a new Nil-Rate Band (NRB) for couples passing down family homes. This will effectively raise the threshold of wealth that can be passed to their direct descendants by a further £175,000 per person by 2021.
Added to the current NRB of £325,000 per person, this raises the tax-free threshold to £1Million for a couple. But the new band will only apply under narrow circumstances, where a main family residence makes up part of that wealth.
“It is hoped that the new rules will dispel the spectre of having to sell the family home because its value has rocketed during the 90’s/2000’s housing boom,” continues Paul. “But it’s not going to help everyone.”
Couples whose wealth is not linked to their property will not be able to make use of the band, for example. If those couples have no family home to pass on, the current NRB of £325,000 each will remain unchanged. The new NRB will also only apply to the main family residence – not second or holiday homes, which will still fall under the gaze of HMRC for potential Death Duty.
“It’s got to be good news for couples who have faced down-sizing and selling their family homes so that they’re not lumbering their loved-ones with debt when they die. But if you’ve got many properties or none, you will still need to be canny about how you pass on your wealth”
If you want to discuss the new NRB and how it will affect you and your loved ones, please call Estate Planning Solutions on 01625 540033 or visit estplan.co.uk.
