We know already that from 2017/18 there will be an increase in inheritance tax in the very restrictive circumstances of an individual leaving their main residence to a direct descendent. This has been defined as a child/grandchild/stepchild/adopted child or foster child. In addition the property must pass under the terms of the Will.We know that the additional exemption will be phased in so that in 2017/18 an additional amount per individual of £100,000 will apply, from 2018/19 £125,000, from 2019/20 £150,000 and from 2020 onwards £175,000.
It is worth remembering that those who are not married or in a civil partnership will only have a main residence nil rate band of up to a maximum of £175,000. It is worth remembering also that where a main residence has been sold after 8 July 2015 because the deceased downsized or had ceased to own a residence assets representing the proceeds of sale will still attract the main residence nil rate band provided they in turn are left to such a direct descendent.
It seems that it will likely be crucial that if an interest in a property is sold that ones Will property reflects the situation and property records are kept to ensure that the additional allowance is available. Speak to us about this. The new rules also highlight the potential issue for people who have put property into a trust where the terms of the trust will determine ultimate ownership as opposed to the terms of the Will. The transfer into the trust may not have been made for IHT purposes (it could for example have been a measure against long term care) but the new rules do, we think, mean that it would be wise to review the situation, as the arrangement with the property may not fall under the new rules and an additional allowance may not be available. Once again please talk to us about this to ensure that everything is set up properly.