It’s Tuesday! Let’s talk Tax!
Read this week’s short tax snippet for Doctors & Dentists, to help you save money and get more organised with your tax affairs. It’s just to give you a flavour – take 5 minutes to have a read.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
Introduction of the Main Residence Allowance for IHT
Our Inheritance Tax Update last month was well received with hundreds of people reading the article and a few taking the time to contact us and ask questions about how they can improve their IHT Planning.
From April 2017, there will be available a nil-rate band of tax, relating to your main residence.
Referred to as the “Family Home Allowance” it has been introduced by the government to recognise the exponential growth in property prices and the subsequent knock-on effect that has on the IHT bill, at the end of the day.
Overall, this allowance will be phased-in from now until 2020. Initially, there is a nil-rate band of £100,000. By 2020, this will increase to £175,000.
This table shows how much IHT you will pay in certain scenarios:
Value of family home | Value of other assets | Value of the estate | IHT liability now (INDIVIDUAL) | IHT liability from April 2020 (INDIVIDUAL) | IHT liability now (COUPLE) | IHT liability from April 2020 (COUPLE) |
---|---|---|---|---|---|---|
£175,000 | £175,000 | £350,000 | Nil | Nil | Nil | Nil |
£200,00 | £300,000 | £500,000 | £70,000 | Nil | Nil | Nil |
£250,000 | £400,000 | £650,000 | £130,000 | £60,000 | Nil | Nil |
£400,000 | £600,000 | £1,000,000 | £270,000 | £200,000 | £140,000 | Nil |
£750,000 | £750,000 | £1,500,000 | £470,000 | £400,000 | £340,000 | £200,000 |
£1,000,000 | £1,000,000 | £2,000,000 | £670,000 | £600,000 | £540,000 | £400,000 |
Overall, this means a tax-free allowance of £500,000 per individual and £1 million for a married couple or civil partnership, including a family home, by the year 2020.
For a bespoke calculation and further ideas about saving tax on your estate, speak with a specialist financial planner that can advise you accordingly.
Pass down your residence for additional tax benefits
Passing on your main residence to a direct descendent when you die will result in further tax-free allowances too.
Those who downsize their property whilst still alive will be entitled to claim an IHT “credit”.
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