New Inheritance Tax Allowances – how does it apply to you?
Inheritance tax allowances have been changed with the eagerly anticipated Residential Nil Rate Band came into effect on 6 April 2017. It acts as an additional allowance for anyone passing a qualifying residence to direct descendants.
Up until now, the Inheritance Tax situation has been such that most individuals have a Nil Rate Band allowance of £325,000. If your estate, or share of it, passes to your husband, wife or civil partner then there is no inheritance tax to be paid on the assets passed between you and your spouse on death. This will mean that a married couple or civil partners will have a total of £650,000 between them, free of inheritance tax.
The recently introduced Residential Nil Rate Band adds an additional relief if:
- The individual dies on or after 6 April 2017;
- The individual owns a home, or a share of one so that it’s included in their estate;
- The individual’s direct descendants such as children or grandchildren inherit the property, or a share of it; and
- The value of the estate is not more than £2 million
For deaths in the following tax years, the Residential Nil Rate Band will be:
- £100,000 in 2017 to 2018
- £125,000 in 2018 to 2019
- £150,000 in 2019 to 2020
- £175,000 in 2020 to 2021
Your estate could also be entitled to the Residential Nil Rate Band in the following circumstances:
- When an individual has downsized to a less valuable home;
- When an individual has sold or given away their home after 7 July 2015;
- The property is not in the UK; or
- The property is a holiday home.
For more information on the above issues, or, to have your will drafted please contact us.