New Main Residence Nile Rate Bank RNRB introduced
Advisors should know that 6th April 2017 marks the introduction of the Residence Nil Rate Band that applies to inheritance tax liability.
This is an increase in the nil rate band for IHT, allowing for offset against the family home. Any nil-rate band that is not used may be transferred to widow’s estate, and when the home is transferred on death to the children, the additional nil rate band may be included for IHT. But anyone’s estate following death after 6th April this year may now be entitled to enhanced relief, subject to qualifying criteria.
The following will have to apply:
• Death occurred on or after 6th April 2017.
• The deceased own a home, or a share of a home
• Direct descendants (normally children or grandchildren) must inherit the home
• The value of the home and assets in estate does not exceed £2 million. The full allowance can only be claimed against the value of the home and not other assets, so if the value of the home is less than the available allowance then the allowance can only be claimed up to the value of the home regardless of the total value of the estate.
• The deceased downsized his or her home, or sold it after 7th July 2015
The amount of relief has been set as £100,000 in the tax year 2017/2018. Thereafter there are pre defined rates through to £175,000 in 2020/2021, with annual increases for inflation.
In the event an estate is valued in excess of £2 million, the relief will be tapered by £1 for every £2 of the excess. HMRC’s guidance explains how the RNRB will apply in most circumstances and includes case studies with workings on some common scenarios.
By 2020-21, parents will be able to pass on property worth up to £1 million free of Inheritance Tax to their direct descendants. However, there will be a tapered withdrawal of the RNRB for estates with a net value of more than £2m. This will be at a withdrawal rate of £1 for every £2 over this threshold.
Take note! IFAC have had a lot of requests in the trusts arena, which is a 100% accurate indicator of a lot of activity for other IFAs as well as you. Keep a look out – all those pension boomers of the go go years of the late 1980's are now past retirement and are now starting to sort things out for the squeezed generation underneath.
DGT Suitability Report is now available on our document library for £30, with a guide to DGT attached. Document Library. see suitability report section. firstname.lastname@example.org