New Legislation to ease yours and your family’s Inheritance Tax burden
“New legislation means that you and your family can save up to £1 million on Inheritance Tax” advises Huma Khan, Solicitor in the Wills, Trusts and Probate team at Prince Evans Solicitors.
Not many individuals are aware of the new rules in relation to “The Residence Nil Rate Band (RNRB)” which will be introduced in April 2017. If not utilised correctly you may miss out on the additional inheritance tax savings.
At present each individual estate is exempt from paying inheritance tax up to the current Nil Rate Band (NRB) of £325,000. Any part of the estate which exceeds £325,000 is chargeable to Inheritance Tax at 40%, with the exception of exempt beneficiaries e.g. spouses, civil partners and charities.
For deaths on or after 9th October 2009, where a spouse or civil partner has predeceased the other and their NRB remains unused (usually because all the assets of the first spouse or civil partner are left to the surviving spouse or civil partner) the unused NRB can be carried forward and added to the NRB of the non deceased spouse.
The new RNRB is can only be claimed on the condition that the main residential home is passed to direct descendants i.e. children, step children, adopted and fostered children and grandchildren.
The property must have been the deceased’s residence at some point in their lives. Where individuals own more than one property upon their death the personal representatives may select which property is to qualify.
An estate will also be entitled to the RNRB when an individual has downsized to a less valuable home or sold or given away their home after 7 July 2015.
The RNRB will increase on a yearly basis as follows:
£100,000 in 2017 to 2018
£125,000 in 2018 to 2019
£150,000 in 2019 to 2020
£175,000 in 2020 to 2021
The RNRB can be transferred between spouses and civil partners on death where the
surviving spouse dies after 5 April 2017 which means that if the NRB together with the
RNRB is unused, upon the second death there could be an IHT allowance of £1 million.
However individuals with larger estates may not benefit to the full extent as the RNRB will
be reduced by £1 for every £2 that exceeds the deceased’s net estate in the sum of £2
It is now more important than ever to ensure that you obtain legal advice on estate planning and review existing Wills or discuss new Wills to be put in to place.