A new residential nil rate band (RNRB) will be introduced on April 6, enabling you to pass through your will an additional £100,000 of property to direct descendants on top of the current individual inheritance tax allowance of £325,000.
Currently, anything under £325,000 is exempt from inheritance tax. Anything above this figure is subject to a 40 per cent tax bill.
The new threshold will be £425,000. This figure will be doubled for couples, as two people are involved. This means they can pass on death property to the value of £850,000 without incurring inheritance tax. The sum will rise incrementally to £1m by 2020/21.
To qualify for the nil band, individuals will need to ensure their main residence goes to direct descendants – children, step-children, adopted children, grandchildren or foster children.
It is important for anyone affected by these new provisions to review their wills, particularly if their current ones include discretionary trusts, as a significant number of wealthier families will lose out on the benefit.
At present, it is possible to effect a Deed of Variation, which must be done within two years of the date of death, although this can only be used if none of the beneficiaries are minors.
It may all sound complicated, but a specialist trusts & estates solicitor will be able to work out exactly how much of a person’s estate is exempt from inheritance tax.
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