Inheritance tax

Nil-rate band

The inheritance tax (IHT) nil-rate band will remain frozen at £325,000 until April 2021.

Main residence nil-rate band

An additional nil-rate band will be available when a residence is passed on death to direct descendants. It will be £100,000 in 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21. It will then increase in line with CPI. The band will be transferable where the second spouse or civil partner of a couple dies after 5 April 2017, regardless of when the first of the couple died.

The extra nil-rate band will also be available when a person downsizes or ceases to own a home after 7 July 2015 and assets of an equivalent value, up to the additional nil-rate band, are passed on death to their direct descendants. This element will be the subject of a technical consultation. For estates with a net value of more than £2 million, the additional nil-rate band will be withdrawn at £1 for every £2 over this threshold.

UK residential property of non-domiciles

From April 2017 IHT will be payable on all UK residential property owned by non-domiciles regardless of their residence status for tax purposes. This will include property held indirectly through an offshore structure. A full detailed consultation will follow later this year.

Non-domiciles generally

From April 2017, a non-domiciled individual will be deemed domiciled for IHT purposes after being UK resident for more than 15 of the past 20 years. If they leave the UK, they will lose their deemed domicile status after five years. Also from April 2017, individuals who were born in the UK to UK-domiciled parents will be treated as UK domiciled while they are in the UK.

Trusts

New rules will target avoidance through the use of multiple trusts as announced in the Autumn Statement 2014. The IHT calculation rules for trusts will also be simplified.