Since the Residence Nil Rate Band (RNRB) was announced in 2015 it has been the topic of much discussion. The new band came into force on 6th April 2017 and now that it is finally here, it is time to ask what this new tax break means for you.
The RNRB has been described as increasing the amount that individuals can pass inheritance tax free from £325,000 to £500,000, however, that is not quite true. Currently everyone can pass £325,000 to anyone they like. This current ordinary nil rate band can be set against any asset. The RNRB is different. It is initially £100,000 but will increase every year until 2020 when it reaches £175,000. When added to the ordinary nil rate band, this brings us to £500,000 but it can only be set against your family home, and only if you leave that property to your direct descendants. This stipulation may cause problems to those using a discretionary Will trust to benefit their family. The situation for married couples and civil partners is slightly different as anything left to a surviving spouse passes inheritance tax free and on the survivor’s death their estate can claim both nil rate bands and both RNRBs. It is important to remember Inheritance Tax when making your Will and you should review your Will in light of these changes. With additional tax savings on offer, it would be a shame to miss out.