The changes in the law relating to inheritance tax recently announced by the Chancellor can be summarised as follows:
The changes apply to:
- Married couples
- Civil Partnerships
The effect:
- On the 1st death the deceased’s nil rate band of £300,000 is transferred automatically to the surviving spouse or surviving civil partner, thereby increasing the nil rate band to £600,000
- It is immediately retrospective, so that widows and widowers may therefore take the benefit of this tax change
- On the 2nd death the two nil rate bands provide a tax free threshold of £600,000 (an umbrella), and which will have increased to £700,000 by 2010
- Whilst applying to registered civil partnerships, and note here that a civil partnership must have been registered, it still excludes cohabitation and also siblings
Thus, for the cohabitants and siblings, there is the discretionary trust will which, in effect, is what the changes have simplified for married couples and registered civil partners.
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