What is the Residential Nil Rate Band?
The Residential Nil Rate Band (RNRB) came initially came into effect 6th April 2017. It applies to property gifted to children (or grandchildren etc) on death. Up to £100,000 (2017/2018) of property can be gifted to children without incurring inheritance tax. This is addition to the standard Nil Rate Band (currently £325,000).
As of 6th April 2018, the RNB increases to £125,000.
What conditions are attached?
It must relate to your residence (so cannot be used, for instance, against a holiday home).
It must pass to a direct descendent. This is defined quite widely, and can include step-children, and other ‘children of the family’ such as foster children.
If your property is worth less than the available RNRB, it cannot be set against any other assets or any other property.
The gift must be immediate on death (not as ultimate beneficiary of a life interest trust for example).
What about my spouse?
Like the standard Nil Rate Band, the Residential Nil Rate Band can be ‘doubled up’ between married couples. This means that, assuming that you initially leave all of your estate to each other, when you both pass away you can benefit from a Residence Nil Rate Band of £250,000. As above, this is in addition to the standard Nil Rate Band which can ‘double up’ in the same way.
So for married couples, leaving their home worth £250,000 or more to their children, they can give away up to £900,000 without incurring an Inheritance Tax charge.
What if my partner and I are not married?
Unfortunately the ‘double up’ effect described above only applies to couples who are married or in a civil partnership. Neither for the standard Nil Rate Band and the Residence Nil Rate Band.
What if I don’t have any children?
The Residence Nil Rate Band is only available if the asset in question is passed to a child (or grandchild etc). Unfortunately, gifts to other relatives (such as nieces or nephews) would not be eligible for the Residence Nil Rate Band.
What else should I be aware of?
Inheritance tax is not always a straight forward issue. It is possible to make provision, during your lifetime, to plan ahead for how your loved ones might be affected by any inheritance tax bill on your death.
The Wills and Probate solicitors at Poole Alcock can help you plan ahead, and provide Inheritance Tax advice tailored specifically to your circumstances. To ask any questions you might have, or to book an appointment, call us on 0800 389 7093. Alternatively you can visit our wills and probate services page here or complete the form linked here and we will call you back.
