For those who follow the blogs of myself and my colleagues at Dallas McMillan, you will be aware that back in 2017 a new Inheritance Tax Nil Rate Band, called the Residential Nil Rate Band (RNRB), was introduced to offset against the Inheritance Tax (IHT) bill being incurred by a rising number of estates on death, fuelled to a significant extent by home ownership and increased house prices.
RNRB is an additional Inheritance Tax Nil Rate Band (over and above the normal Inheritance Tax Nil Rate Band), however RNRB is only available to parents when passing on their estate on death to their direct lineal descendants (either directly or via their spouse’s estate on the second death). Even if the parent who has died downsized or sold their home prior to death, RNRB may still be available provided such cessation or sale occurred on or after 8 July 2015.
My first blog on RNRB is still available on our website and it is well worth a read, as it sets out in more detail when a person’s estate will qualify for RNRB
Rarely do any of us look forward to the start of a new tax year, as often it means that the amount of tax we pay will increase, but as RNRB was phased in over a number of years the start of the new tax year will also see qualifying amount of RNRB rise. The current maximum level of RNRB available to the estate of each parent rose with the start of the 2019/2020 tax year from £125,000 per person to £150,000 per person (meaning that where a person’s estate qualifies for the full current transferrable RNRB of their predeceasing spouse, their estate could now qualify for a combined RNRB amount of up to £300,000).
It should however be noted that even if your estate appears to fall within the rules of RNRB, the wording and the way in which your direct lineal descendents receive their share of your estate (either directly from your estate or from the estate of the surviving spouse) can result in your estate not qualifying for RNRB. If you therefore wish to know whether your current Will would prevent your estate qualifying for RNRB then we would strongly advise you to seek a review of your Will.
While those who are not parents will not qualify for the additional RNRB, there are other tax planning measures you can take during life to limit the IHT liability of your estate on death.
The experienced private client team at Dallas McMillan will be happy to undertake a review of your Will or answer any other questions you may have relating to your estate.