In the Summer 2015 budget the government confirmed changes will be put it place to raise the tax threshold to £1 million for married couples and civil partners leaving property. This is excellent news for home owners in Essex, a county where many large family homes are now approaching £1 million. David Johnson from Asset Wills explains how the news will affect the county.
Essex house prices keep rising, especially in popular commuter towns that provide fast access to the Docklands and The City of London, and in luxury property developments such as Beaulieu Park in Chelmsford.
£1 m inheritance tax threshold
In the Summer Budget at the beginning of July, a new transferable main residence allowance was brought in; this will slowly increase from £100,000 in 2017 to £175,000 per person by 2020.
Under the current rules, the ‘nil band rate’, the amount that can be passed on free of tax is £325,000 for one person. Therefore a couple would be able to pass on property or assets with a value up to £650,000. An additional £175,000 per person has been added through a new ‘main residence allowance’, which tops the nil rate band up to £500,000 for each person with the condition of it only being able to cover your main family home.
Who will this effect?
For people who inherit or have previously inherited small amounts, the changes won’t have much impact. On the other hand, people in the middle bracket will benefit because previously they would have had to pay inheritance tax, which has become a great burden for many people. Whereas now they can reap the rewards of an inheritance without having to worry about being taxed. Unfortunately, the same cannot be said for those with an estate worth more than £1m, as they will still have pay inheritance tax. That being said, it will be less now these new rules have been put in place.
The importance of making a will
Dying without a will means you can’t guarantee your estate will be handled how you would have liked. A legal binding document such as a will can’t be disputed, so whatever it says is what will have to be carried out. It’s important that when you’re gone, all of your property and assets are given to the right people.
This is especially important now with the changes with inheritance tax, and it means that any beneficiaries you may have will be taxed less, or not at all. This obviously depends on value, but it will be especially important when inheriting property of high value. A will not only gives you the peace of mind knowing your love ones will be taken care of, but now with the changes with inheritance tax you will know they will receive what you leave behind at it’s full value.
As these changes continue to take place over the next few years, home owners and their beneficiaries will continue see the rewards. Now with this system coming into place, people leaving behind property and assets to their relatives can be safe in the knowledge they won’t be heavily taxed. Instead they will be able to benefit from the whole inheritance without having to worry about losing a certain amount of it to tax.
If you are unsure how these changes will affect you, it is important to speak with a qualified financial advisor (such as David Johnson from Asset Wills) who will be able to assess your finances provide you with a plan. You can also use this information to update your will.