It’s a question many of us will face as we get older, but what are the options and benefits that it could bring?
Moving to a smaller property that is more accustomed to our needs, or to simply free up funds to boost your retirement pot is a major decision for any family. But the changes that have been raised by the government in recent months could be more important than ever in helping you decide.
What are the financial changes?
Following the recent boost to the property market, the summer Budget welcomed the introduction of a new Inheritance Tax allowance of up to £1m for married couples or civil partners, rising from the current £650,000. This new tax-free threshold is known as the main residence nil-rate band and means that property can be passed to direct descendants such as children or grandchildren. The government will initially bring in a £100,000 allowance per person from April 2017. This will be available in addition to the existing £325,000 nil-rate band, and will only apply to the deceased’s interest in a property that has been their main residence at some point. The allowance will then increase by £25,000 each financial year until April 2020.
In order that the very wealthy do not benefit from this new allowance, the relief will be restricted for estates in excess of £2 million.
What will happen if you downsize?
If you decide that downsizing is an option, you will still be eligible for an ‘Inheritance Tax credit’, meaning that if the bulk of your estate is left to direct descendants, you will still qualify for the new threshold. The change is an attempt to get the property market moving and alleviate the housing shortage for larger families.
If you are looking to downsize in the near future, it is essential to review all of the options that are available to you before selling your home; the process should be planned and researched thoroughly to ensure you are making the right decision.