Whilst the housing market continues to stagnate, it looks as though there could be some unexpected perks where a property has fallen in value.
Inheritance tax (IHT) is one area of law which remains controversial, particularly where it is the family left behind who are hit with a tax bill.
Thanks to a law change which will fully come into effect from April 2020, the Residence Nil Rate Band will be £175,000. This additional IHT allowance relates to property as long as it passes to a direct descendant. So for married couples, including the nil rate band in the sum of £325,000, will have an IHT allowance of £1 million from the tax year 2020/21).
It may seem a large sum, but, for many, this is quickly becoming the norm for property prices in their area – or close to it at least. Plus, as IHT is payable at 40% on all assets above the nil rate band, it’s not surprising to see how many families are feeling cheated out of the inheritance of a much-loved home for many years, that the deceased may have worked hard all their life for.
However, whilst property prices remain relatively low, some IHT paid may be able repayable if the deceased’s property sells for less than the valuation at the date when the deceased passed away. In Oxford, for example, where average property values have declined by around 5.5% in the last two years, there’s a chance that a £1 million house is now worth £945,000. This means the tax due on the property would reduce so the executors can claim a refund of any overpaid IHT from HMRC.
Some experts say that this could be the way for a little while, as the uncertainty of Brexit continues to cloud the market.
If you need advice on the nil rate residence relief and how to claim this, or think you might have been affected by falling property prices and may be due a refund on previously paid IHT, contact the Private Client team at Downs Solicitors to see how we can help.