One of the main changes to Inheritance Tax legislation since the introduction of the transferable nil rate band in 2007 is the forthcoming introduction of the Residential Nil Rate Band (RNRB), designed to assist parents to leave their main residence to their children.
Prior to the introduction of this new RNRB, there were two types of Nil Rate Band (NRB):
A married couple/civil partnership would therefore only have to pay IHT on death if the value of their combined estates exceeded £650,000. The new RNRB will effectively increase this amount to £1m.
Here's how it works:
From April 2017 the new RNRB will be phased in giving each person (spouse/civil partner) an additional £100,000. This will increase over a four year period so that by 2020/21 each individual will have an additional £175,000 to add to the existing £325,000 NRB, giving a total relief of £500,000 each.
In order to qualify for the RNRB a number of conditions must be met, including:
The RNRB can be transferred to a surviving spouse/civil partner to the extent that it has not been utilised on first death (it is even possible to do this where first death was pre-April 2017).
The new RNRB could therefore prove to be a very useful additional relief, saving couples up to £140,000 in Inheritance Tax.
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