The Government has made it clear that the special inheritance tax concession for family homes should not be available to people who have no children, this against a backdrop of significant protests.
The "Family Home Allowance" was introduced in the summer budget earlier this year and comes into effect from 6 April 2017. It is intended to provide a mechanism whereby a married couple's joint £650,000 inheritance tax exemption can be extended up to £1m (although the extra allowance is applicable only to the family home). The proposed changes provide that each spouse will have a separate £175,000 allowance each, being £350,000 combined, on top of their individual £325,000 nil rate bands. Be warned though, the £175,000 is not immediate from April 2017, it's being phased in between then and 2021 and will start at only £100,000 each. It's also worthy of note that this starts to be clawed back where the property in question exceeds £2m in value!
Now for the next sting in the tail as it will only apply where the family home is bequeathed to children and grandchildren (stepchildren and adopted children are included too). Therefore, a couple with no children effectively face up to a £140,000 bill (40% death tax applied to £350,000) above and beyond that which couples with children would pay.
It is interesting to note the use of the word “bequeath” in David Gauke’s comments too, as it may well imply that where one passes away without leaving a Will that specifically leaves the family home to a direct descendant the new allowance could also be refused. Therefore the possibility of dying intestate (without a Will) could adversely affect one’s inheritance tax liability
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