Sandy Lamb, Partner in our Private Client team outlines the new inheritance tax (IHT) allowance.
From April 2017, a new IHT-free allowance is being introduced. This is known as the residence nil rate band (RNRB) and applies if you leave your residence to your “direct descendants”.
According to the Government, the objective of the policy is to “reduce the burden of IHT for most families by making it easier to pass on the family home to direct descendants without a tax charge”.
The IHT nil rate band (NRB) has been fixed at £325,000 for some years now, and looks set to remain where it is until at least 2020. IHT is most often charged at 40% on the value of a deceased person’s estate which exceeds the NRB. Where spouses and civil partners leave their estates to each other, it is possible to take advantage of a transferred NRB, giving a maximum of £650,000 IHT-free. Like the regular NRB, the RNRB can be transferred between spouses and civil partners.
As you would expect, the additional allowance comes with some fairly strict rules and conditions, and if not planned for carefully, it could be lost.
If you would like more information, or to find out whether you should consider revising your Will to benefit from this allowance, one of our Private Client team will be happy to help.