I understand that the rules for inheritance tax have changed. My father has recently passed away, he bequeathed his home to me and it has been valued at £450,000. Will I need to pay inheritance tax?
The normal cap for Inheritance tax remains unchanged at £325,000. This is called the 'nil rate band' (NRB). Remember, you should always check for any gifts made in the seven years before death as these may reduce the available NRB. If your father was a widower, then it's also possible that his estate can carry over any unused NRB from his late wife's estate. The new rules introduced in April created a new tax relief called the 'residence nil rate band' (RNRB). This is separate from the normal NRB. The new rules only apply to individuals who leave their home - or their share of a jointly owned home to their direct descendants, meaning children, grandchildren, etc. This gift of the home will be free of tax up to a value of £100,000. This means that the first £425,000 of your father's estate may be tax-free. Also, just like the NRB, if your father was a widower then it may be possible to transfer the unused RNRB allowance from his late wife's estate.
However, you should check whether the total value of your father's estate exceeds £2,000,000 as this will reduce the available RNRB tax relief. Also, the RNRB only applies if the gift is made directly to a direct descendant. If your father gave the property into a trust then this won't usually qualify.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.