The law is changing in relation to Inheritance Tax on the 6th April 2017.
As the law presently stands, an individual has an Inheritance Tax Nil Rate Band of £325,000. This means that they will not be liable to pay Inheritance Tax on an estate below the value of £325,000. Inheritance Tax is paid at the rate of 40% above this figure subject to the exemptions and reliefs being available within the Inheritance Tax regime. The Residence Nil Rate Band will be introduced on the 6th April 2017. This is an additional Nil Rate Band available to the individual.
The main features of the Residence Nil Rate Band are as follows:
1. It is available where a person dies on or after the 6th April 2017 provided that the following conditions are met:
a) Their estate includes an interest in property. Interest in property is an interest in a dwelling house owned by the person at the date of death. It also includes a dwelling house no longer owned by that person at the date of death.
The Executors of the deceased’s estate can nominate the property if it contains more than one dwelling house.
b) The qualifying residential interest is required to be inherited by certain descendants. This includes children, grandchildren and great grandchildren. It also includes stepchildren and adopted children. It does not include nephews and nieces.
2. The unused residence Nil Rate Band can be carried forward to a surviving spouse or civil partner.
3. The Residence Nil Rate Band reduces if the estate of the deceased person exceeds the value of two million pounds at the date of death.
4. The Residence Nil Rate Band for the financial year 2017/2018 is £100,000. It will increase by £25,000 in the next three financial years. It will therefore stand at £175,000 by 2020.
The combination of the Nil Rate Band and the Residence Nil Rate Band will mean that an individual will have a combined Nil Rate Band of half a million pounds by 2020 provided that the necessary conditions are met. A married couple will have a combined Nil Rate Band of one million pounds.
If you would like further information about inheritance tax and planning your estate, our experienced and accredited solicitors can help, please call 0330 300 1103 or request a call back above.