Retirement Inheritance tax

Is your family’s inheritance still under threat?

Retirement Inheritance tax

The new rule – which sees a ‘main residence’ nil rate band gradually added on top of the existing threshold – means fewer families are likely to be liable for IHT. But scenarios such as the expected rise in house prices mean the new allowance may not be enough.

From April 2017, the ‘main residence’ nil rate band starts at £100,000 (per person), increasing to £125,000 in 2018-19 and to £150,000 in 2019-20, before reaching an amount of £175,000 in 2020-21. This will then increase in line with the Consumer Price Index.

According to the Centre of Economics and Business research, average UK property prices will climb by 4.7pc over 2015 – reaching £261,000. And this year-on-year rise is predicted to continue over the next five years, so by 2020 the average UK house could be worth £321,000 – just below the £350,000 joint allowance for married couples.

And let’s not forget that property prices in the South East and London areas are well above the UK average.

In September 2015, Rightmove forecasted that, by the end of 2020, the average London property could be worth £1 million.

So even if your main property is currently below the threshold, this may not be the case over the next few years.


• Only people with children or grandchildren are eligible for the new allowance. Therefore, if you’re planning to leave your estate to a niece, nephew or friend, for example, you won’t be able to use the new allowance.

• If you have multiple properties, only your main home can qualify from this new allowance. Therefore, buy-to-let properties don’t benefit from this allowance.

• Your estate is not just your home. It’s also your savings and investments, car, land and even jewellery.

According to the Centre of Economics and Business research, average UK property prices will climb by 4.7pc

How IHT works

If the value of your estate is above the IHT nil rate band, upon your death your loved ones could end up paying 40pc tax on everything you own above it.

The thresholds depend on your individual circumstances.

They currently stand at £325,000 per person, and for married couples and widowers it’s up to £650,000. You will have to wait a further five years to benefit from the full main residence nil rate band allowance.

Retirement Equity Release

Equity release unlocks the value built up in your home as a tax free lump sum. There’s no need to move out and you’ll still own your home. With equity release you don’t have to make monthly payments, unless you choose to. It’s usually repaid when the last borrower moves into long term care or dies.

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.
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