The much discussed Residential Nil Rate Band (RNRB) comes into effect on 6th April 2017 and is designed to increase the Inheritance Tax threshold available to you. It works by including a bolt on allowance specifically attached to a property.
Up until now the Inheritance Tax situation has been such that most individuals have a Nil Rate Band (NRB) 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 what passes between you and your spouse on death. On second death your executors can make an application to the Revenue to claim any unused Nil Rate Band from the first death – this is known as the Transferrable Nil Rate Band. This will mean that a married couple or civil partners will have a total of £650,000 between them, free of inheritance tax. In order to make the application paperwork is required by the Revenue but we can help with this should you wish.
The newly implemented RNRB brings an additional relief, however, in order to claim it then you must meet certain criteria.
What are the qualifying factors?
Under HM Revenue & Customs guidelines, an estate will be entitled to the RNRB if the:
It is really important that your Will is reviewed carefully to ensure your estate does not miss out on this new valuable relief when you die. This relief does not apply, if in your Will, you have settled your property upon certain types of trust, to include a discretionary trust. We can advise you of the best way to gift your property when you die looking at your individual circumstances.
How much is the RNRB relief?
For deaths in the following tax years it will be:
Your estate could be entitled to the RNRB when an individual has downsized to a less valuable home or sold or given away their home after 7 July 2015. The property must have been your residence at some point in your life. It does not necessarily have to be the one you are living in at the date of your death. There is no requirement that it is your main residence or even a UK property. A holiday home can also qualify. The extra allowance available would be capped at the value of the property or the value of the equity available should there be a mortgage outstanding.
What should I do now?
We recommend you contact us and make an appointment to review your Will, or make a Will if you do not have one. During this appointment you can discuss your circumstances with a member of our team and review the current legislation and see how it can affect you.
If you would like to make an appointment please contact Rachel Carey at Wolferstans on 01752 292389.