Inheritance Tax - The Magic £1M Threshold

There is a potential for married couples and civil partners to transfer up to £1m free of inheritance tax on death. It is can be achieved by adding a new main residence tax free amount to the traditional allowance.

Make sure you qualify: Ensure your affairs are properly ordered and your executors know they will need to proactively claim the relief.

How does it work?

Each individual has an inheritance tax allowance known as the nil rate band of £325,000 (frozen until 2021). Any unused allowance can be transferred to the surviving spouse of civil partner, so combined there is potential for a married couple or civil partners to leave £650,000 tax free.

The new main residence nil rate band will rise to £175,000 by 2021 and is to be added to the traditional allowance making £500,000 each, which doubles to the magic million for a qualifying couple.

It can apply even where a person has downsized or sold up, perhaps to move into a nursing home.

Who does it help?

Those with children or grandchildren who they wish to benefit. The new main residence nil rate band does not apply unless the residence is left to children or grandchildren. Adopted and fostered children will qualify as will step-children. It can apply even where a person has downsized or sold up, perhaps to move into a nursing home.

High Net Worth Individuals

The new main residence relief is restricted where an estates is in excess of £2million. No additional main residence relief will be available to estates over £2.35m.

What should I do now?

Review your Will immediately to ensure that your affairs are organised to optimise the availability of allowances as soon the new main residence nil rate band comes into effect.

Fitzhugh Gates Solicitors Comment

If you do not have a Will, make one without delay.

The rules are complicated: Seek professional advice on amendments to your Will and whether you need to restructure ownership of your assets to take full advantage. Our expert private client team will be delighted to advise you.

You may also wish to consider the benefits of having professional executors to ensure all reliefs are claimed. We would be pleased to discuss this with you.

Please contact our Private Client Team for further information and advice.

Head of department:Richard Wallace-Lower - Partner