The Chancellor confirmed the introduction of a new nil rate band of up to £175,000 where the family home is passed to children or grandchildren. This is in addition to the current nil rate band which has been frozen at £325,000 and will remain frozen until 2020/21.
However the full £175,000 will not be available until tax year 2020/21 and will be phased in with an allowance of £100,000 being available from 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and £175,000 in 2020/21. It will then increase in line with the CPI.
As with the existing nil rate band the new property nil rate band can be transferred between spouses or civil partners, so with effect from 2020/21 a married couple could pass £1 million to their children tax free provided the family home is worth at least £350,000 thereby saving £140,000.
As expected anyone with a net estate over £2 million will see the property nil rate band reduced until it is completely lost once the estate is over £2.2 million (2017/18) £2.25 million (201//19), £2.3 million (2019/20) and £2.35 million (2020/21).
Note the property nil rate band can only be used where there is a transfer to children and grandchildren. Also for those individuals who are divorced or for couples who are not married the transferring and therefore doubling up of the nil rate band and property nil rate band is not available.