Summer Budget 2015: IHT threshold upped to £1m for couples

The inheritance tax (IHT) threshold rise from £650,000 to £1 million for married couples passing on the family home was confirmed in today's Budget.

The move, which was outlined in the Conservative manifesto, will be effective as of 6 April 2017.

At present, the beneficiaries of an estate must pay 40% tax on any portion of its value that exceeds the nil-rate band of £325,000 per person.

The increased threshold effectively means couples will pass on a tax-free £350,000 home allowance to their beneficiaries.

Almost one million properties in England, Scotland and Wales could benefit from the Chancellor's decision to raise the IHT threshold, according to property website Zoopla.

Londoners to gain the most

The change takes the total number of homes exempt from IHT from 26.33 million to 27.28 million - an increase of 953,498.

Zoopla analysis revealed that Londoners stand to gain the most from the increased threshold, with 428,011 extra properties escaping IHT. And nearly 250,000 more homes in the South East would also be exempt.

Gary Rycroft, solicitor and a member of the Law Society Wills and Equity Committee, said: 'As well as being able to pass on £650,000 tax free to descendants, if your home is sold for £350,000 or less after your death, your surviving relatives will pay no inheritance tax on the sale.'

However, he pointed out that there is concern if families need to sell a property to pay for long-term care then they will lose the £350,000 housing allowance.

'I have many clients who would be affected by this,' sais Rycroft, who added, 'if some of the value of some of the capital in the family home has been taken out under an equity release scheme, the full benefit of the proposed new IHT allowance may not be available.'

He warned that thousands of people will be affected by this change and may need to re-structure their wills to make the most of the effective housing allowance.

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