In a clarification of the exact terms of the so called main residence nil rate band, the note allows for the scenario where someone no longer owns a property on death to benefit from it.
The stipulation is only that the property was owned as at 8 July 2015, and it does not matter if, when or how the property was disposed.
The residence nil-rate amount will be introduced for deaths on or after 6 April 2017.
This, says HMRC, will be phased in over a period of four years so that for deaths in 2017 to 2018 the maximum additional amount will be set at £100,000, rising to £125,000 for 2018 to 2019, £150,000 for 2019 to 2020 and to £175,000 for 2020 to 2021 – it will be indexed in line with the Consumer Price Index (CPI) from 2021 to 2022 onwards.
It is only available where the deceased’s residence, or a share in a residence, is inherited by direct descendants.
On this point, Rachael Griffin, head of product law and financial planning at Old Mutual Wealth said it seemed more akin to forced heirship and contradicts the principles of the English and Welsh legal system which allows people free will to select their beneficiaries.
She also said that by not linking the new residence nil-rate band to the value of the deceased’s property on death, or within a defined period of death, the proposals are just a way of enhancing the IHT nil-rate band on the overall estate.
“This seems a very generous proposal and means people can benefit from an enhanced IHT allowance even if they don’t own a property. The restrictions around who can benefit from the new proposals also seem very archaic in this modern world, where not everyone marries or has children”, she said.
She added that the extra rules will make estate planning even more complicated for people: “A far simpler approach would have been to enhance the IHT allowance for everyone, and not try to link it to a property they currently or previously owned, and not try to limit it to direct decedents.”
