As from 6th April, the amount a married couple, or those in a civil partnership, can leave free of inheritance tax has increased so it is now possible for such a couple can now leave a combined amount of up to £1 million to their direct descendants.
This amount is made up of the nil rate band, which is currently set at £325,000 per person together with the residence nil rate band which is now £175,000 per person. This makes a total of £500,000 for an individual but crucially, these amounts can also be transferred to the estate of the surviving spouse or civil partner, creating the £1 million exemption on the second death.
The same allowances are available to individuals who are not married or in a civil partnership, although there is no ability to transfer them to another’s estate, and it is also worth noting that the residence nil rate band tapers away for an estate worth over £2 million.
The availability of this tax free amount should be taken into account by couples considering their wills and undertaking inheritance tax planning, but the availability of reliefs and exemptions also needs to be taken into account by those who are administrating an estate.
There are a variety of different reliefs and exemptions available for inheritance tax, some with very specific criteria or time limits for claiming them, and so it is extremely important that proper advice is obtained early on.
For example, a recent article in the Financial Times pointed out that the current falls in value in the stock market and housing market could open the door to potential IHT refunds on an estate, if shares or property are sold at a loss compared to the date of death value and qualify for the relevant reliefs.
Colman Coyle has considerable expertise and experience in acting in connection with the administration of estates and inheritance tax planning for individuals and if you would like to discuss the issues raised here, please contact Patrick Green on +44 (0)20 7354 3000 or Patrick.Green@colmancoyle.com.