Inheritance Tax & The Residence Nil Rate Band (RNRB)

The Residence Nil Rate Band (RNRB) came in to force in April 2017 and represents the Conservative’s manifesto pledge to increase the Nil Rate Band for married couples and civil partners to £1 million via a combination of the Nil Rate Band (NRB) and the RNRB.  In the current tax year the RNRB is £125,000.00 and will rise by £25,000.00 per year until it reaches a maximum of £175,000.00 in the tax year 2020-2021. After this it will be adjusted in line with the Consumer Prices Index unless otherwise changed by the Treasury.

 

So, how does it work?

 

The RNRB is available when:

  1. A person dies on or after 6th April 2017
  2. Their estate included a Qualifying Residential Interest; and
  3. The Qualifying Residential Interest is inherited by lineal decedents.

 

Although this sounds simple there are a number of rules, exemptions and exclusions which may affect the availability of the RNRB when a person dies.

 

In essence, if you own the home you live in and are passing it to your children (including adopted, step and foster children), grandchildren or a spouse of you children or grandchildren and your total estate value is less than £2 million then it is likely you will attract the full RNRB.

 

It is essential if you own your own home to consider the RNRB in any estate planning you do. By leaving your property to certain types of Trust you may stop it being inherited by a lineal descendent and therefore your estate will not qualify for the RNRB. Should your estate exceed the Nil Rate Band available this may leave your beneficiaries paying unnecessary inheritance tax.

 

Town & Country Law can provide advice on the RNRB generally along with a range of Will Trusts that can ensure your estate takes advantage of the full exemptions and relief available to it while protecting your assets for your loved ones. Call us today on 01522 282 500 to book your free no obligation appointment.