Inheritance Tax and the Home
20th September 2016
The well-known headline rule for the exemption of a couple’s main residence is that it is being increased to £1m per couple. However, the rule is not that straightforward and the detail contains some hurdles to clear.
- The full £1m is not available until the death of the second spouse after 5 April 2020. The additional amount available for the main residence is increasing from £100k for 2017-18 (total exemption per couple £850k) to £175k (total exemption £1m) by three equal annual instalments of £25k.
- The additional amount is reduced by £1 for every £2 that the total estate exceeds £2m. This applies on the death of each spouse.
- The property has to be inherited by direct descendants (ie children, grandchildren, etc.)
On the plus side:
- If the couple or surviving spouse has downsized on or after 8 July 2015, relief is available on the proceeds if still in the estate on the death of the surviving spouse.
- The additional amount of £175k will be index-linked after 2020-21.
- If there is more than one property in the estate which has been used as the main residence at any time, the executors can nominate the one which qualifies for the exemption.
If you would like some more information on this matter or to discuss your own situation, please contact Peter Hedgethorne on firstname.lastname@example.org or 01273 701200.
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