Following the recent announcement that the average house price had hit a record high, it is worth a reminder that last year the Government introduced a special provision for inheritance tax intended to apply when passing on your home when you die, primarily to your children or grandchildren. This gave each parent an amount of £100,000 which would be taxed at a rate of 0% (the Main Residence Nil Rate Band).

From 6 April this year, the Main Residence Nil Rate Band was increased to £125,000.

This allowance is in addition to the normal Nil Rate Band, under which up to the first £325,000 of a person’s estate on death is also taxed at 0%. Therefore, each parent will have up to £450,000, which they can leave when they die, free of inheritance tax.

If one parent dies and leaves all of their estate to the surviving spouse, both the normal Nil Rate Band and the Main Residence Nil Rate Band are transferrable to the estate of the survivor. This means that, on the second death, up to £900,000 can be left free of tax.

There are, however, quite complicated rules as to when the Main Residence Nil Rate Band is available and some restrictions on the amount available in larger estates. It applies only to transfers on death and is not available to gifts made in lifetime.

If you would like to make new Wills or review your existing Wills to ensure that you leave your assets in the most tax efficient way, our Private Client team at George Green LLP have significant experience advising on Wills and Inheritance Tax planning.