The inheritance tax rules are set to change in the coming years. An additional nil-rate band is to be introduced where a residence is passed on death on or after 6 April 2017 to direct descendants such as a child or a grandchild. The draft legislation provides that any unused excess can be passed from one spouse on death to another even when the first spouse has died before 6 April 2017.
This means if your husband dies by 31 December 2015, for example, and passes on the property to you, and you die after 6 April 2017, you will qualify to take advantage of the relief allocated to you and any unused relief from your late husband.
If you were both to die before 6 April 2017, this relief isn’t available and your estate would be subject to the normal and current rules on inheritance tax.
Please note that this relief is contained in draft legislation and isn’t yet – and may never become – law.
David Wesley-Yates is a chartered tax adviser at Red & Black Accountancy.