Inheritance Tax – July Budget 2015

It has been reported that the Conservative Party are set to increase the Inheritance Tax allowance in the Budget today.

The move will allow a couple to pass a house worth up to £1m to their children or grandchildren. The Chancellor will create a £175,000, tax-free allowance per person for their main property on top of their existing £325,000 allowance that can be applied to all assets.

Under the current rules, inheritance tax is charged on estates worth more than £325,000, rising to £650,000 for couples, because the rate is transferable between those who are married or in civil partnerships. It is charged at 40% of the excess value of assets above the threshold and is paid by the estate of the deceased.

The new proposals raise the rate to £500,000 by introducing a new zero-rate band of £175,000 on a main property when it is passed on death to a child or grandchild. This would create a £1m limit for couples because it would also be transferable and mean that 94% of households are exempt from the tax.