Thousands of Lancashire families are set to benefit from the government’s new inheritance tax allowance.
The rules, which come into force from April 1, mean that couples can pass on their estate – worth up to £1million – to their children or grandchildren tax free.
Currently, each individual can pass on assets worth up to £325,000, with anything in excess of this taxed at 40 per cent. If an estate is left to a spouse, civil partner or charity, it won’t be taxed regardless of its size.
From April the threshold will increase by an additional £100,000 per person, with the Government then phasing in a further £25,000 allowance a year until it reaches £175,000 per person, meaning an individual would then have a tax free allowance of £500,000.
This extra allowance can be set against the value of a residential property, so by April 2020 a couple can escape the inheritance tax net on £1million of their wealth, if their main residence is passed to their children or grandchildren.
Property prices have been rising fast, so an increasing number of estates are being pushed into the inheritance tax net.
According to HMRC tax data, the number of estates hit by inheritance tax is set to increase by another 15 per cent to around 30,000 in 2017.
While the new nil-rate band will only benefit people with estates worth up to £2million, these changes are welcome news, especially for families living in Lancashire where the average price of a house is much lower than similar properties in the South.
Inheritance tax and estate planning is a complex area of law, therefore it’s important to seek specialist advice to manage your inheritance tax liabilities without delay.
For more information on inheritance tax and estate planning, contact Stephen Parr on 01706 233 439 or email him at Stephen.Parr@whnsolicitors.co.uk