After your death your relatives will have to pay inheritance tax (IHT) at 40%, if the net value of your assets exceeds £325,000. A discounted rate of 36% applies if you leave at least 10% of your net estate to charity.
Where you leave the value of your home to a direct descendant, an extra IHT nil rate band of £100,000 applies, increasing the total nil rate band to £425,000. The home-related nil rate band increases by £25,000 each year until it reaches £175,000 from April 2020. Those who die after 5 April 2020 could have an IHT-free band worth £500,000, which may be doubled for a married couple or civil partners.
However, the home-related nil rate band can only apply where your home, or value derived from your home (if you have down-sized or moved to a care-home), is left to one or more of: your child, grandchild, great grandchild, step-child, foster child, or the spouse of one of those individuals.
Large estates won’t benefit from the full value of the home-related nil rate band, as it is tapered away by £1 for every £2 of the estate value which exceeds £2 million. The rules are extremely complicated, so we should discuss how your Will should be drafted to ensure that the maximum relief from IHT is obtained.
For more information on IHT and how to plan your affairs, contact the experts at Clarke Nicklin
Clarke Nicklin House, Brooks Drive, Cheadle Royal Business Park, Cheadle, Stockport SK8 3TD