A Budget that puts the next generation first - proclaimed The Chancellor.
Sadly this didn’t mean the scrapping of Inheritance Tax (IHT) or even any reductions in the tax. So it seems for now the next generation continue to stand second in line with George taking his share first.
A reminder of the changes to the IHT rules announced last year
The government will introduce an additional nil-rate band from April 2017 when a residence is passed on death to direct descendants. This will be increased gradually up to 2020 to give an additional £175,000 of tax breaks in addition to the standard IHT nil-rate band which remains at £325,000.
Couples may transfer any unused nil-rate band and this will allow husband and wife to use joint limits to leave £1m of property to their descendants.
For non-doms there was less good news. The government is to introduce legislation to ensure that, from April 2017, IHT is payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure.
An announcement prior to the Budget, which has been far less publicised, is proposals that will give rise to some significant changes in probate rates.
Under the current system, executors pay a flat fee of £215 for probate regardless of the size of the estate. There is an exemption from this fee for estates valued at £5,000 or less. The welcome proposals are to lift this exemption limit to £50,000.
However, the new proposals also introduce a sliding scale of fees which will significantly increase rates for larger estates. The fees will be capped at £20,000 for estates worth more than £2m.
This provides a major headache for executors (usually a spouse or child) as this fee needs to be settled before they can actually get their hands on money held within the estate.
Pete Simons, Moore Stephens, said: “If you really want to put the next generation first then it is still possible to reduce or even eliminate an Inheritance Tax bill by careful planning.”