Inheritance Tax: Siblings

HM Treasury written question – answered on 23rd September 2015.

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Photo of Lord Lexden Lord Lexden Conservative

To ask Her Majesty’s Government, further to the answer by Baroness Williams of Trafford on 9 September (HL Deb, cols 1427–9), whether they will publish full details of how the family home allowance announced in the 2015 Budget will affect siblings who have joint ownership of their home.

Photo of Lord Lexden Lord Lexden Conservative

To ask Her Majesty’s Government, further to the answer by Baroness Williams of Trafford on 9 September (HL Deb, cols 1427–9), what is the position of siblings who live together in jointly owned property under current inheritance tax laws.

Photo of Lord Bridges of Headley Lord Bridges of Headley The Parliamentary Secretary, Cabinet Office, The Parliamentary Secretary, Cabinet Office

All individuals have an inheritance tax threshold (or ‘nil rate band’), currently £325,000, which is the value below which an estate does not have to pay any inheritance tax. The Summer Budget 2015 announced that from April 2017, a new additional transferable residence nil-rate band of £175,000 is being phased in for individuals who leave their home on death to their children, grandchildren or other direct descendants. Together with the existing nil-rate band this means that most individuals will have an effective inheritance tax threshold of up to £500,000 each.

The long standing spouse exemption means that any transfers of assets between spouses or civil partners are exempt from inheritance tax. The Government has no plans to change the inheritance tax treatment of long-term cohabiting and co-dependent siblings.

Where a property is jointly owned by siblings, the individual sibling’s share of the property will be included in their estate for inheritance tax purposes. Each individual’s estate is considered separately and the position for siblings is the same as for other co-habiting individuals.

Full details of the legislation relating to the new residence allowance announced in the Summer Budget 2015 can be found at clause 9 of the Summer Finance Bill. Guidance will be published nearer the time that the new allowance comes into effect.

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