Inheritance tax is charged on a person’s death at the rate of 40% based on a person’s estate that are over the nil rate band (£325,000 for the tax year 2016 – 2017). From the 6th April 2017, there will be an additional nil rate band that applies, called the Residential Nil Rate Band (RNRB).
The RNRB has the effect of reducing the amount of inheritance tax that a person pays on their estate when the family home is left to their children, grandchildren and certain other individuals (for example, stepchildren, foster children, spouses and civil partners).
How can a person ensure that their estate benefits from the RNRB?
To ensure that a person maximises the effect of the RNRB, we strongly recommend that you speak with one of our solicitors who will be able to review your will and amend it so as to make your will and estate as tax-efficient as possible.
Can a person claim if their spouse passed away before the 6th of April 2017?
The RNRB can be claimed on a person’s estate if they die on or after the 6th of April 2017. The RNRB can apply even if a person dies before then, as a surviving spouse or civil partner may be able to carry forward the RNRB once they die.
How much is the RNRB worth?
Before the tax year 2017-2018, the RNRB is said to be worth £100,000 per person. Therefore, for a married couple there could be a tax-free estate of up to £825,000. The RNRB will increase by £25,000 per year from the tax year 2017-2018, and will reach up to £175,000 by the tax year 2020-2021.
What happens if a person moves out of their home and into a care home?
Under current government proposals, the RNRB will be available to people who have sold their home in order to downsize to a lower value property.
The RNRB is also available even where a person has owned a property that they no longer live in, so long as it was your home at some time during your period of ownership.
What happens if a person owns more than one home?
If a person owns more than one home, then the executors appointed in the will will have to choose which property will benefit from the RNRB. In some cases, it is advisable to prepare a letter of wishes to go with your will so that you can guide your executors as to which property you would like the RNRB to apply to.
At Foskett Marr Gadsby & Head LLP, we have the patience, expertise and the experience to guide you through drafting your will and planning your estate. Should you wish to speak further about this with someone, then please contact our Wills and Probate Team.