Now we have had time to digest the latest budget, it has become clear that the headline about the Inheritance Tax threshold rising to £1 Million requires a little closer examination.
The current nil-rate band is frozen at £325,000 until 5 April 2018 and this will continue to apply until April 2021. On the second to die of a married couple or civil partnership, any unused nil-rate band of the first to die, can be claimed making the total nil-rate band £650,000.
What changed in the budget is a new nil-rate band of £175,000 will apply in future where the main residence passes to direct descendants, making the individual nil-rate band up to £500,000 and the combined band for two up to £1 Million.
However this new nil-rate band is not in force until April 2017 and it is being phased in gradually so it is worth up to £100,000 in 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and finally £175,000 in 2020/21.
This is potentially good news for homeowners who have direct descendants and not good at all where there are no direct descendants to pass the house to.