Make sure you are set to get the full £1 Million IHT Allowance
There is no such certainty as death and taxes, but with many of us living longer healthier lives, planning for our retirement and organising and sorting out our tax affairs are crucial to a contented future! This April sees the introduction of the Residence Nil Rate Band (RNRB) – which will affect the amount of Inheritance Tax you may now have to pay, but to your advantage.
This change could add up to saving couples £140,000 in tax, with additional planning needs for people with more than one residential property or where the estate exceeds the £2m threshold.
Previously there were two types of Nil Rate Band (NRB):
- The ‘ordinary’ NRB, currently £325,000 per person which is available to offset against lifetime gifts and death estates
- The ‘transferable’ NRB - that amount of NRB left unused on first death which can be passed to a surviving spouse/civil partner
A married couple/civil partnership would pay IHT on death if the value of their combined estates exceeded £650,000.
However, the RNRB being phased in will give each person an additional £100,000 from the start. This will increase over a four year period so by 2020/21 each individual will have an additional £175,000 to add to the existing £325,000 NRB giving a total relief of £500,000 each.
Qualifying conditions include:
- The estate must include a ‘qualifying’ residential property (a property that the deceased has lived in some point during ownership but you do not have to be residing in the property at the time of death to qualify)
- The property must pass to a direct lineal descendant - a child, grandchild or remoter issue including step, adopted or fostered children
- The overall value of the estate cannot exceed £2m. This is calculated by reference to assets less liabilities but does not include valuable reliefs such as Agricultural Property Relief or Business Property Relief.
- The RNBR can be transferred to a surviving spouse/civil partner to the extent that it has not been utilised on first death (it is even possible to do this where first death was pre April 2017).
For advice on all Inheritance Tax issues contact our specialist team today on 0161 785 3500
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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.