Inheritance Tax

From June 2018 Newsletter

As residential property continues to increase more and more people are falling into the 40%

Inheritance tax band (IHT).  In an attempt to ease the burdon on families by making it easier to pass on

the family home to direct decendants without incurring a tax charge, a "residence nil-rate" tax band

was introduced in 2017.  It is also know as "The Family Home Allowance" (FHA) and works on top

of the £325,000 per person nil-rate tax band.  The FHA for this current year is £125,000pp and

therefore an individual's maximum IHT exemption is £450,000 and a couple's maximum IHT

exemption is £900,000.  The FHA increases by £25,000pa until April 2020; thereafter it increases in

line with the Consumer Price Index.  This extra allowance does not have to be claimed - it is included

automatically so every estate entitled to it will benefit from it. The allowance tapers away when the

estate exceeds £2m.  In order to qualify for the FHA, the family property must pass directly to "direct decendants" which includes children, grandchildren and some others.  This is a complex piece of tax

law and anyone interested in this subject is urged to google "Family Home Allowance" and view the severalweb sites on show. One aspect worthy of note is that the FHA can disturb existing estate

planning arrangements and therefore those arrangemnts should be reassessed.  It is strongly

recommended that professional advice is obtained by people interested in this subject.