Couples will be eligible for an
additional £350,000 Inheritance Tax relief after George Osborne
confirmed plans to scrap the levy on family homes worth up to £1m in the
Emergency Budget.
Osborne announced today that he will raise the Inheritance Tax threshold from £325,000 per person to £500,000 in his first wholly Conservative Budget since 1996.
It means that a couple will be able to pass on assets worth up to £1m, including a family home, to their children and grandchildren without paying any Inheritance Tax after April 2017.
Up to 953,498 more properties in England, Scotland and Wales are exempt from Inheritance Tax under Osborne’s proposals to raise threshold, according to Zoopla.
And Londoners are set to benefit the most from the proposal, with an extra 428,011 homes escaping the levy.
Osborne announced today that he will raise the Inheritance Tax threshold from £325,000 per person to £500,000 in his first wholly Conservative Budget since 1996.
It means that a couple will be able to pass on assets worth up to £1m, including a family home, to their children and grandchildren without paying any Inheritance Tax after April 2017.
Up to 953,498 more properties in England, Scotland and Wales are exempt from Inheritance Tax under Osborne’s proposals to raise threshold, according to Zoopla.
And Londoners are set to benefit the most from the proposal, with an extra 428,011 homes escaping the levy.
Under the current rules, a 40 per cent
Inheritance Tax is charged on property and any other assets in an estate
worth more than £325,000 for individuals and £650,000 for married
couples and civil partners.
Osborne will now introduce a new £175,000 allowance for a family home when it is passed on to children or grandchildren from April 2017. It will be added to the existing threshold, where no Inheritance Tax is paid on the first £325,000 on the value of the estate. It will be fixed until the end of 2020 / 2021.
The changes mean that individuals will be able to pass on assets, including property, worth up to £500,000 tax-free, while the total for a couple will be £1m.
Osborne also confirmed that downsizers will get the allowance up to the value of their previous home if they buy a cheaper property.
The relief will taper away for estates worth more than £2m.
Inheritance Tax was first introduced in 1986. The number of homes subjected to Inheritance Tax has increased alongside rising house prices.
The Inheritance Tax changes were included in the Conservative Party’s manifesto in 2010 and earlier this year.
Osborne said: "The wish to pass something on to your children is about the most basic, human and natural aspiration there is. Inheritance Tax was designed to be paid by the very rich.
"Yet today there are more families pulled into the Inheritance Tax net than ever before – and the number is set to double over the next five years. It’s not fair and we will act."
The Chancellor added: "The result for families is this. You can pass up to £1m on to your children free of Inheritance Tax. No more Inheritance Tax on family homes. Aspiration supported. The tax paid only by the rich. The security of home ownership restored. Promise made – promise delivered."
Jeremy Blackburn, RICS head of policy, said: "Measures to reassure downsizing baby boomers that they will not be penalised through their Inheritance Tax allowance are welcome, but more could be done to unlock second hand stock now. One such reform might be to incentivise over 60s to downsize now by doubling their Inheritance Tax allowance on sale."
Osborne will now introduce a new £175,000 allowance for a family home when it is passed on to children or grandchildren from April 2017. It will be added to the existing threshold, where no Inheritance Tax is paid on the first £325,000 on the value of the estate. It will be fixed until the end of 2020 / 2021.
The changes mean that individuals will be able to pass on assets, including property, worth up to £500,000 tax-free, while the total for a couple will be £1m.
Osborne also confirmed that downsizers will get the allowance up to the value of their previous home if they buy a cheaper property.
The relief will taper away for estates worth more than £2m.
Inheritance Tax was first introduced in 1986. The number of homes subjected to Inheritance Tax has increased alongside rising house prices.
The Inheritance Tax changes were included in the Conservative Party’s manifesto in 2010 and earlier this year.
Osborne said: "The wish to pass something on to your children is about the most basic, human and natural aspiration there is. Inheritance Tax was designed to be paid by the very rich.
"Yet today there are more families pulled into the Inheritance Tax net than ever before – and the number is set to double over the next five years. It’s not fair and we will act."
The Chancellor added: "The result for families is this. You can pass up to £1m on to your children free of Inheritance Tax. No more Inheritance Tax on family homes. Aspiration supported. The tax paid only by the rich. The security of home ownership restored. Promise made – promise delivered."
Jeremy Blackburn, RICS head of policy, said: "Measures to reassure downsizing baby boomers that they will not be penalised through their Inheritance Tax allowance are welcome, but more could be done to unlock second hand stock now. One such reform might be to incentivise over 60s to downsize now by doubling their Inheritance Tax allowance on sale."
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