In 2015 the Chancellor of the Exchequer, George Osborne, announced a major change in Inheritance tax which added on an extra element for family homes which were left when someone died. This amount was tapered starting in 2017 and the last part of that increase is happening in 2020/21.

In addition to the standard rate of Inheritance tax relief, which sits at £325,000,  an allowance for family homes that are passed on to direct descendants (children and grandchildren) was also introduced which started at £100,000 in 2017 and increased to £175,000 for the tax year 2020/21.

So this tax year (2020/21) is the final year of the major increases to the property portion of the allowance, that finish up with a total allowance of £500,000.

The Inheritance Tax Allowance can be passed between couples, so that when the first partner dies the unused part of that allowance is passed on to the surviving spouse. When the second spouse dies the allowance can effectively be doubled.

For example spouse 1 dies and does not use any of his Nil rate band (perhaps he passes everything to his spouse and has not made any bequests to anyone else).

He can then pass his £325,000 allowance on to his wife. She will then have an allowance of £650,000.

The same thing can happen with the property part of the allowance that has not been used. This means that it is possible for the surviving spouse to have an allowance of up to £1m including the property allowance.

Obviously you need to check all of your details with your tax adviser to see what the situation is for your individual circumstances.