Recent Announcements on Inheritance Tax - Hot Topics Q & A

Q. I am a retired dentist, and also a widow. Am I right in thinking that the recent announcements on Inheritance Tax will benefit me greatly?

I would estimate that my total worth including my home is around £850,000.
  
A. Yes you are absolutely right!

It is not often that a government makes a change that will greatly benefit our clients, but this has indeed happened. Mr Darling has said that for married couples, the surviving spouse, on the death of the first of them, will be able to use both their nil rate band allowances of £300,000. Whereas unless you did specific Will planning the surviving spouse was only allowed their own allowance up until now.

The good news for you and your family is that this rule has been made retrospective. So although you tell us that your husband died 15 years ago, you will be allowed to use this rule. This will mean that you will have a £600,000 allowance (presuming you had not used your husband's allowance in his lifetime), not a £300,000 allowance. 
   
Everything thereafter will be taxed at 40%, and so doing our sums you will still have a tax bill of around £100,000, although it would have been nearer £220,000!

There are other routes you can take to help mimimise this tax even further, and we suggest you talk to a trusted adviser or planner about this.