1st June 2015
Up to 3,000 families a year could miss out on proposed inheritance tax (IHT) changes as a result of already selling the family home according to NFU Mutual.
Analysis of HM Revenue & Customs statistics by the financial services firm showed that thousands of estates without residential property are hit by inheritance tax bills each year.
New proposals outlined in the Conservative Party manifesto and expected to be announced in next month’s Budget, will allow a married couple to pass a main property worth up to £1m to their children without paying any inheritance tax.
But only the main residence will qualify for the extra £175,000 addition to each person’s £325,000 inheritance tax threshold.
Sean McCann, chartered financial planner at NFU Mutual, said: “The proposed changes to inheritance tax will stick in the craw of those who have already sold the family home to move in with relatives or even to pay for the costs of care.
“These proposals are acknowledgement from the government that the existing inheritance tax threshold is far too low. However, it would be much fairer to apply an overall increase rather than tinker with the rules around who can benefit and who can’t.”
McCann warned that under the new proposals, the UK could soon start to see more elderly people reluctantly house-sitting for the next generation or even upsizing to make the most of this potential tax break.
“The wider effects on the property market could be significant,” he added.
“Inheritance tax is notoriously complex but there are many ways to reduce potential bills. Financial planning with the help of a professional can help make sure families are making the most of their money and aren’t paying any more tax than they have to.”