Thank you for contacting me about inheritance tax.
Inheritance tax was designed only to be paid by the very richest in our society but, under the previous system, an ever increasing number of families were being pulled into paying this tax. That is why I welcome the new system which has taken the family home out of inheritance tax for all but the richest families.
Reforms were phased in from 2017 increasing the effective inheritance tax allowance to £1 million. This has been achieved through the introduction of a new main residence allowance on inheritance tax for those who leave their home to their children or grandchildren. This was initially set at £100,000 but was increased incrementally to £175,000.
This main residence allowance sits on top of the existing tax free allowance of £325,000, together constituting a £500,000 inheritance tax free allowance for those leaving their home to their descendants. With this allowance transferable between married couples and civil partners, these reforms effectively increased the maximum tax-free allowance for a couple from £650,000 to £1 million.
I am confident that these reforms reduce the burden of inheritance tax for most families by making it easier to pass on the family home to their children and grandchildren without a tax charge. The Chancellor announced in the Autumn Statement 2022 that the thresholds for inheritance tax will remain fixed for an extra two years, to 2028.
Thank you again for taking the time to contact me.