- 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.
A woman is seeking hundreds of thousands of pounds compensation from Barclays, claiming the bank’s will-writing service resulted in her losing a stake in a valuable London home. Barclays is contesting the claim.
The woman’s complaint has already been assessed by the Financial Ombudsman Service and the bank found at fault. The Ombudsman ordered Barclays to pay “a fair and reasonable settlement” but unusually, Barclays decided to ignore the Financial Ombudsman’s recommendation, on the grounds its will-writing division is not regulated, and therefore does not have to adhere to the Ombudsman’s findings. The Ombudsman has accepted this is technically correct.
In 2007 Ebenezer Aregbesola used Barclays’ £90 will-writing service to make a will dealing with his various assets including homes overseas and in London. His will instructed half of the London home to be given to his daughter, Tinuola Aregbesola, on his death.
The property was owned jointly by Mr Aregbesola and his wife as joint tenants and because of this, on Mr Aregbesola’s death, the property went wholly to his wife – in contravention of the wishes spelt out in the will.
In order for the Will to work as it should, Barclays should have severed the joint tenancy. This would have enabled the deceased’s half of the property’s to pass to his daughter. This is a simple formality and basic procedure in such cases. A solicitor would issue a notice of severance as a matter of good practise. However, because it was neglected in this case, Mr Aregbesola’s widow is legally entitled to the whole property.
The case highlights the danger of popular, cheap “DIY” wills which are often too simplistic to accurately reflect a person’s wishes.
How to avoid similar problems:-
Where parents remarry and enter into property transactions with their new spouse, wills bequeathing assets to children of former relationships need to be checked.
Wills should be reviewed regularly (every 12-24 months) to ensure they are up to date
Professional advice from a solicitor should be sought when making a Will. Average fees are around £200 but you are covered by the solicitors indemnity insurance if things go wrong, and a legal firm is regulated giving you extra protection
There is now a growing complexity of family structures, and this coupled with the rising value of house prices and estates, means that a properly qualified and experienced lawyer is best placed to make your Will for you.