From 6 April 2017, a new Residence Nil-Rate Band (RNRB) for inheritance tax (IHT) has been introduced. The band enables a ‘family home’ to be passed wholly or partially tax-free on death to direct descendants, such as children or grandchildren.
The RNRB is in addition to an individual’s own nil-rate band, and is initially set at £100,000 in 2017/18, before rising in a series of stages to reach £175,000 in 2020/21. Up to £1 million of a married couple’s estate could eventually be taken outside of the scope of IHT, providing the full nil-rate bands are available to each spouse.
The band can only be used in respect of one residential property. This must have been a residence of the deceased at some point. Buy-to-lets will not, therefore, be eligible for the relief. There is a tapered withdrawal of the RNRB for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
For more information on the new RNRB, please contact us. We would be happy to assist you.