This is additional to the £325,000 threshold for the current nil-tax rate band which applies to all assets.
Gillian Coverley, head of the wills, trust and probate team at Irwin Mitchell, said: “While we don’t yet have the finer details, this is a significant change to Inheritance tax although the provisions do not start to take effect until the 17-18 tax year and won’t come fully into effect until 2020-2021. For deaths prior 6th April 2017 the existing rules apply. The rules also only apply if you leave the family home to your children or grandchildren and not to other relatives.
“As the new provisions only apply to the family home ( or an equivalent value if that was sold prior to death) this additional allowance looks quite complicated to calculate. It is not as simple as saying the nil rate band has been increased to £1 million as has been commonly reported
“By increasing the IHT thresholds with a ‘property only’ allowance it raises questions about what happens if house prices continue to rise and suggests that the general limit of £325k which applies to all assets and has been set for some time, is going to remain the same until at least 2021.”
Specialist will dispute lawyers at Irwin Mitchell also warned that the changes to the inheritance tax threshold may lead to an increase in the number of legal challenges being launched regarding estates.
Katie Winslow, a legal expert in Irwin Mitchell’s will, trust and estate disputes team, said: “We have already seen in recent years an increase in disputes which can be partly attributed to estates generally becoming higher in value, due to a range of factors such as the rise seen in property prices.
“When this is combined with the recent changes introduced regarding pensions, with many accessing retirement savings in a lump sum rather than with an annuity, this means that people are likely to be leaving behind more assets than before.
“In our experience, having much more at stake can often mean it is more likely that the terms of a will or the handling of an estate is contested – so the importance of having a clear and concise will in place outlining your wishes has become arguably more important in order to head off the consequence of loved ones seeking to launch legal challenges.”