Severance of Tenancy

Severance of Tenancy agreements between spouses protects the estate by changing the legal way in which property is owned.

This has little effect on a day to day basis; however the benefit of owning property in this way is felt when it passes to your children. At that point Inheritance Tax liability is calculated. Severance of Tenancy in conjunction with a Discretionary Will Trust can effectively double the limit above which Inheritance Tax is paid, from £300,000 to £600,000, potentially saving £120,000 in tax.

The limit for the tax year 2008/9 is £312,000 which is charged at a nil rate and any excess is charged at 40%.

The Chancellor has announced that the IHT limits will increase as follows:-
2009/10 - £325,000 and proposed change in 2010/11 - £350,000

Levels, bases and relief's from taxation are subject to change.

For further details please call us on 0800 298 1600