The main residence allwoance
Introduced in April 2017, the main residence allowance means that couples can potentially leave property worth up to £1 million before paying any inheritance tax (depending on when they die, because this rule is being phased in gradually until 2020).
The main residence allowance is only valid on a main property when a home is passed on to a direct descendent. Only children, grandchildren and step-children can qualify. The way the rule works is – on top of your existing allowance of £325,000 – your descendants could get:
- An extra £125,000 of tax-free allowance for 2018/19
- A further £25,000 of additional allowance each tax year until 2020/21
Therefore, a personal total allowance of £500,000 could be reached by 2020/21 and for a couple that means £1,000,000. (£500,000 is the sum total of £325,000 added to the extra £125,000 this year; £25,000 the following year; and £25,000 the year after.)