Leaving £1 million and pay no inheritance tax (perhaps!)

Leaving £1 million and pay no inheritance tax (perhaps!)

Monday, 19 August 2019

Over the years, there’s been a lot of talk about IHT tax reliefs and tax rates. At the moment, every adult has a £325,000 nil rate band.

That means that on their demise the first £325,000 of their chargeable estate (assets less debts) is exempt from IHT. Any estate above this amount will pay 40% tax on the value above the threshold. The tax must be paid before any assets are divided up or distributed in accordance with the terms of the Will or if there is no Will according to the rules of intestacy.

For married couples and civil partners the rules allow a spouse or civil partner to be exempt.  This means that if one partner dies, the survivor can claim any unused nil rate band, in effect doubling the nil rate allowance to up to £650,000.

This exemption doesn’t currently apply to unmarried couples.

A new allowance called the residence nil rate band was introduced nearly two years ago and this is available for individuals who pass on a home to a child or grandchild (including stepchildren, adopted children or foster children). What this allowance does is effectively give a further boost to the existing £325,000 nil rate bands. The relief presently stands at £125,000 and rises to £175,000 in April next year.

It means that after April 2020 married couples and civil partners can potentially leave £1million to their children with no IHT to pay! But as always there are pitfalls and matters to consider.

The residence nil rate band can only be used for the family home or the sale proceeds. It can only go to direct descendants which is a little unfair on those without children who wish to consider bequests to nieces or nephews and…the allowance is reduced for estates totaling more than £2 million by a £1 for every £2 above the £2 million. A further example where some greater thought or simplification would be welcome!

Need help?

For more information on how we can help with inheritance tax, please speak to me or to your usual MHA Larking Gowen contact.

Call 0330 024 0888 or email

Sally Farrow

Personal Tax Senior Manager



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