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Good news – the inheritance tax allowance has increased to £900,000!

Posted on April 11th 2018

money representing that saved by the residence nil rate band

As of 6th April, married couples and civil partners will be able to pass on up to £900,000 completely free of inheritance tax.

What do the changes mean?

Before the changes, a single person could pass up to £325,000 to their heirs without paying inheritance tax. Inheritance tax is a tax on the estate (the property, money and possessions) of someone who’s died.

Once you exceed the inheritance tax allowance, a tax of 40% is applied on everything above this amount. Any allowance you do not use before you die can be transferred to your spouse/civil partner, along with your assets. Before the changes, this meant that a married couple could pass £650,000 of inheritance on, tax-free.

Residence nil-rate:

In 2017, an additional inheritance tax allowance, called the ‘residence nil-rate,’ was introduced. You can learn about this fully here .

This tax allowance applies when your estate contains a property you intend to pass on. When it was implemented in 2017, it gave each person an additional £100,000 to pass on tax-free. To reflect the rising value of property in the UK, the allowance is due to rise by £25,000 every year until 2020/21.

That means that this year the residence nil-rate is £125,000 per person. Added to the regular inheritance tax allowance of £325,000, you will now be able to pass on £450,000 to your direct descendants in the 2018/19 tax year. If you are a married couple, this means you will be able to pass on up to £900,000, without paying inheritance tax.

Can you pass your property on to anyone tax-free?

For the additional inheritance tax allowance to apply, your property (or the majority of it) must be passed on to ‘direct descendants.’ This includes:

  • Children and their spouses/civil partners
  • Grandchildren and their spouses/civil partners
  • Great-grandchildren and their spouses/civil partners
  • Stepchildren
  • Adopted children
  • Foster children
  • Children who were under the guardianship of the people passing on their estate.

To learn more:

This article by Which? discusses the changes to inheritance tax. It also discusses how other changes this year may mean that you can leave even more of your estate, tax-free, to your descendants.

How can we help?

If you would like advice about inheritance tax, or would like to make a Will, please contact our experts today on 01244 312306. You can also fill in our contact form here.

Call and speak to a lawyer on 01244 312306