Inheritance Tax – New Main Residence Nil Rate Band (RNRB) is here.
The 6th April 2017 marked the introduction of the Residence Nil Rate Band which applies to inheritance tax (IHT) liability.
This is an increase in the nil rate band for IHT, allowing for an ‘offset’ against the family home.
Up until 6th April, any nil-rate band that was not used was transferred to the widow’s or widower’s estate and when the home is transferred on death to the children, the additional nil rate band was included for IHT calculations.
After 6th April anyone’s estate following death may now be entitled to enhanced relief (RNRB), subject to qualifying criteria.
The following will have to apply:
- Death occurred on or after 6th April 2017.
- The deceased owned a home, or the share of a home.
- Direct descendants (Children or grandchildren) must inherit the home.
- The value of the home does not exceed £2 million.
- The deceased downsized his or her home, or sold it after 7th July 2015.
The amount of relief has been set as £100,000 in this tax year 2017/2018. Thereafter there are pre-defined rates through to £175,000 in 2020/2021, with annual increases for inflation.
In the event an estate is valued in excess of £2 million, the relief will be tapered by £1 for every £2 of the excess. HMRC’s guidance explains how the RNRB will apply in most circumstances and includes case studies with workings on some common scenarios.
By 2020-21, parents will be able to pass on property worth up to £1 million free of Inheritance Tax to their direct descendants. However, there will be a tapered withdrawal of the RNRB for estates with a net value of more than £2m. This will be at a withdrawal rate of £1 for every £2 over this threshold.
Please call Keith Bonner, lead Independent Financial Adviser and Director of HSC Financial Services of Brighton for Inheritance Tax advice and general tax planning advice.
Call on 01273 7104041 or email firstname.lastname@example.org
The value of your tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.