The chancellor George Osborne has confirmed a new £1m inheritance tax allowance for couples who want to pass on the family home to children and grandchildren.
The news means that if you own a property with a value of up to £1m you can leave it to your children or grandchildren and pay no inheritance tax at all once the new rules come into force from April 2017.
The move comes as thousands of home owners have been dragged into the current inheritance tax bracket after the value of properties have risen across the UK and especially in the south east and London.
This value of the family home has given cause for concern for a large percentage of homeowners worried about how much tax will be applied to their estate after death.
Mr Osborne said on the changes:
“Inheritance tax was designed to be paid by the very rich, yet today there are more families pulled into the inheritance tax net than ever before - and the number is set to double over the next five years. It's not fair and we will act.
The new threshold, so that people can pass on estates worth up to £1m free of inheritance tax, will not apply to estates worth more than £2m.
Tax paid only by the rich. The security of home ownership restored. Promise made, promise delivered.”
Mr Osbourne believes that the move will be popular with the public because it taps in to the natural aspiration to leave behind something for your descendants.
The new rules will replace the current Inheritance Tax rates which give a tax free allowance of £325,000 per person. This means married couples or civil partners can currently pass over assets worth up to £650,000 before Inheritance Tax is charged.