What is the Residence Nil Rate Band?
From 6 April 2017 a new Residence Nil Rate Band (RNRB) was made available meaning that the first £100,000 of a residence’s value (rising by £25,000 every year to £175,000 by 2020) is exempt from inheritance tax if the residence passes to a direct descendant (children, grandchildren etc).
The following conditions must be satisfied to claim the RNRB:
- You die on or after 6 April 2017; and
- You leave an estate valued at less than £2million (to be increased in line with inflation from 2021); and
- You leave a residence (not necessarily your home) to direct descendants
Any unused portion of the RNRB can be transferred to a surviving spouse, provided the surviving spouse leaves their property to a direct descendant. This is available even if the first spouse died before 6 April 2017, as long as the surviving spouse dies after 6 April 2017.
What does the RNRB mean for you?
The RNRB will result in many people paying less or no inheritance tax. For example, for the tax year 2017-2018, a married couple making use of the full transferable nil rate band and RNRB will be able to pass £850,000 free of inheritance tax (if they meet the conditions). This will rise to £1million by 2020-2021.
Do you need to do anything to claim the RNRB?
For many people, their executors will automatically be able to claim the benefit of the RNRB without difficulty. However, to ensure that your family receive the full benefit of the RNRB, it is advisable to review your Will. This is particularly important where you have, or are considering:
- Leaving some of your estate to someone other than a direct descendant
- Leaving your estate to a direct descendant subject to an age contingency g. to grandchildren so long as they reach 25
- Placing all or part of your estate into a discretionary trust which includes direct descendants as beneficiaries
For further information about the RNRB, or to arrange a review, please contact Anne Lewis, a partner in the private client team at Cripps Pemberton Greenish on 01892 506 356 or email her at firstname.lastname@example.org.