The summer budget 2015 contained measures that will have wide-ranging effects on individuals and families. Here, partner Stephen Parr summarises the key points.
Major inheritance tax changes
Among the most significant developments is the new £1million inheritance tax (IHT) threshold on family homes, which will be of great benefit to better-off families.
The changes will allow a married couple, or registered civil partners, to pass homes worth up to £1million to children or grandchildren.
On top of the current £325,000 allowance per person, an additional allowance will be created for an individual’s main residence. This can then be applied to the whole estate.
Under present rules, IHT is charged on estates worth more than £325,000, rising to £650,000 for couples because the rate is transferable between people who are married or in civil partnerships. It is charged at 40 per cent of the excess value of assets above the threshold and paid by the estate of the deceased.
The new proposals will lift the rate to £500,000 by introducing a new allowance of £175,000 on a main property when it is passed to a child or grandchild, creating the new £1million limit.
Tax changes are good news for families
Individuals will be better off, thanks to the chancellor’s decision to raise the income tax personal allowance to £11,000 next year and increase the 40 per cent tax threshold from an annual income of £42,385 to £43,000 next year.
An additional boost to families is that parents of three and four year olds will get up to 30 hours of free childcare per week from 2017, double the 15 hours currently available.
Introduction of national living wage tempered by welfare cuts
Less well-off individuals will benefit significantly due to the introduction of a national living wage. This will be introduced next year at £7.20 per hour, reaching £9 per hour by 2020. The chancellor said six million people will see a pay increase as a result of the new system.
However, welfare cuts totalling £12 billion by 2019/20 will hit lower income working age households. In addition, individuals’ finances will be affected by changes to the income threshold for tax credits, which is to be reduced from £6,420 to £3,850.
For further information contact Stephen Parr at our Haslingden office on 01706 233 439 or email Stephen.parr@whnsolicitors.co.uk
