- The current allowance where no IHT is charged on the first £325,000 (per person) of someone’s estate remains unchanged. Above the threshold, the charge is 40%.
- A new tax-free ‘main residence’ band will be introduced from 2017, valid only on a main residence and where the recipient of a home is a direct descendant (classed as children, step-children and grandchildren). This will be phased in gradually, starting at £100,000 in April 2017, rising by £25,000 each year until it reaches £175,000 in 2020.
- In 2017 the maximum that can be passed IHT free will be £850,000 for married couples and civil partners and £425,000 for others. For singles, this is made up of the existing £325,000, plus the “extra” £100,000 main residence band. For couples, when the first dies their allowance is passed to the survivor, so that £425,000 is doubled to £850,000.
- In 2020, the tax-free amount will rise to £1m for couples and £500,000 for singles, made up of the existing £325,000 and the “extra” main residence allowance of £175,000.
- On properties worth £2 million or more, homeowners lose £1 of the ‘main residence’ allowance for every £2 of value above £2m. So for a couple, with a property worth £2,350,000 or more there will no “extra” allowance.
