As part of their pre-election campaign, the Conservative Party had promised to effectively raise the threshold for inheritance tax from £650,000 to £1 million for a married couple, where a family home is involved.
This was not included in the Queen’s Speech on 27th May, but now the Treasury Minister, David Gauke, has confirmed to parliament that it will go ahead.
The new Conservative government will introduce a transferable main residence relief of £175,000 per individual, in addition to the existing nil rate band of £325,000. This will take the “family home out of inheritance tax for all but the richest”, he claims.
This creates an effective £500,000 inheritance tax threshold for individuals in certain circumstances. Any unused main residence allowance or nil rate band for each individual would be transferred to their surviving spouse or civil partner, which is in line with existing principles and means the effective inheritance tax threshold will rise to £1 million in certain circumstances once the policy is introduced.
This affects all UK domiciled individuals, regardless of their residence, and non UK domiciled individuals whose main home is situated in the UK.
The government is due to issue a detailed report in the autumn and the additional relief is likely to be implemented shortly afterwards.
Once this is in effect, a larger proportion of an individual’s assets can be transferred to their loved ones free of inheritance tax.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
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