But fast forward eight years to when the policy was finally introduced in this year's summer Budget, and suddenly the increase in the nil rate band (NRB) seems far from straightforward.
George Osborne did say back in 2007 that he would take the family home out of inheritance tax. However at the time he did not make it clear that the increased allowance would only be in respect of property. It turns out that far from increasing each individual's NRB threefold (from the current £325,000) the reality is not only less generous, but far more complex.
For a start only those with direct descendants will qualify for the additional nil rate band, so childless people will not benefit. In addition the £1m refers to the maximum available to a married couple or civil partners, so rather than trebling, the NRB has increased by a more modest £175,000, and even this amount will not be available until the tax year 2020/21.
I recently attend a seminar at which the eminent QC James Kessler described the new legislation as ' a joke '. Far from simplifying the inheritance tax regime and ensuring that only the very wealthy pay the inheritance tax the new regime appears to be unnecessarily complex and so far looks as if it will be difficult to administer.
It will be phased in over a period of four years from the 2017/18 tax year, when an additional £100,000 will be available. This will increase to £175,000 for 2020/21. However where the estate is worth in excess of £2m there will be a withdrawal at a rate of £1 for every £2 in value, meaning there is no additional relief for those with estates of more than £2.35m.
The RNRB will only be available where the deceased's residence or share in a residence is inherited by direct descendants. Direct descendants include step children.
The residence must have been lived in by the deceased at some stage but it does not have to have been their main residence.
Downsizing relief will be available for those who have previously owned a property (see my next blog for more on this).
It has become evident that the announcement left many unanswered questions. The Government has already published amendments to the 2015/16 Finance Bill on the subject of property held in trust and of who exactly can benefit.
In relation to trusts, a person will be treated as inheriting the property if it is settled in certain types of trusts, where the settled assets are held or applied for the benefit of that person.These include trusts where the beneficiary is treated as if they own the property themselves, and trusts for bereaved minors and other persons under the age of 25.
It has also revealed that an estate will qualify for the new residence nil rate band when a home has been left to the current spouse or civil partner of a direct descendant of the deceased, or, in some cases, to the direct descendant's widow, widower, or surviving civil partner.
What is interesting is that this focus on family as beneficiaries appears to be a move away from the testamentary freedom that has always been the cornerstone of English and Welsh succession law. Are we moving towards more of a continental European approach to inheritance tax where the tax is paid depending on who the beneficiary is?
No doubt much more clarification will be necessary both before and after the first estates benefit from the RNRB in April 2017.
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