Tax is never popular, but inheritance tax (paying tax when somebody dies) is often seen as one of the more objectionable taxes. Until April of this year the general rule (there are exceptions) is that you pay inheritance tax if the value of your estate exceeds the Nil-Rate Band (‘NRB’) which, for the last eight years, has been £325,000. The balance of your estate above the NRB is subject to inheritance tax, which is currently set at 40%.
The government has now introduced an additional nil rate band called the Residence Nil Rate Band (‘RNRB’), with the intention of increasing the inheritance that children will receive from their parents.
As the name suggests, the RNRB only applies to property that you own and live in as your main residence, and it does not apply to every estate. In order to qualify for the RNRB you must ensure that your Will is written in such a way that you leave your property to your children (including step-children) or grandchildren. If your grandchildren do inherit from your estate, the age at which they do so will affect whether or not your estate qualifies for the Residence Nil Rate Band. The value of your estate will also affect the availability of the RNRB, and if you leave your estate into a Trust the additional relief may not be available.
The Residence Nil Rate Band is very complex, and you should seek advice as to whether your estate qualifies for the relief.
If you have any queries or questions about Wills, Trusts, Tax or Inheritance Tax please contact our Private Client Specialist Katie: