New inheritance tax changes allow couples to pass on as much as Â£900,000 to children
The new nil-band rate, or inheritance tax allowance, officially came into effect on Friday (April 6).
Currently each person can pass on £325,000 to a descendant tax free – this figure is frozen for 2018/19.
However, if the estate includes the home, individuals can get an extra allowance under the ‘residence nil-rate’, an allowance increase of £100,000 to £125,000 this tax year.
Once added onto the inheritance tax allowance an individual can effectively pass on £450,000 tax free – added on to the partner’s allowance, this would allow £900,000 to be passed on to children or grandchildren.
Gareth Shaw, Which? Money Expert, said: “The new tax year sees people able to pass on an extra £25,000 to their heirs tax-free – if your estate includes your home. This figure set to rise further over the next few years and there could be other announcements in 2018.
“To work out how best to approach these changes and navigate this often confusing system, it may be worth consulting a financial adviser to ensure these new tax rules work the best they can for you and your loved ones.”