The new residence nil rate band could increase the inheritance you can leave your children by up to £100,000 from April, rising to £175,000 by 2020. This means that for a husband and wife they have an additional £200,000 NRB.
To benefit from this additional amount, the family home must pass to direct descendants - that is, children or grandchildren. And to be entitled to the full amount, clients will need to keep the value of their individual estates below £2M. Beyond this, the allowance will be tapered, and lost altogether once values pitch beyond £2.35M. But there are planning strategies that may help some clients stay below the taper threshold, including lifetime gifting made at any time.
The residence nil rate band is in addition to the standard nil rate band, which will remain frozen at £325,000 until April 2021. The additional amount will be phased in starting at £100,000 and increasing by £25,000 a year until it reaches £175,000 in April 2020.
These are the maximum amounts. The available allowance will be reduced if the value of the property is less than this, or if the value of an individual’s estate exceeds £2M.
Just like the standard rate band, the residence nil rate band will also be transferable between spouses and civil partners on death. So the allowance is not lost if the family home passes to the survivor on first death. This could mean if the second spouse dies after April 2020, a couple could benefit from a combined nil rate band of £1M (2 x £325,000 plus 2 x £175,000).
It also doesn’t matter when the first spouse died or even if they owned a property at all. The first spouse may have died many years before the introduction of the RNRB and the property held in the sole name of the survivor. Even so there will still be allowance which can be transferred to the surviving spouse.
For further information please contact AJ Wealth Management Ltd.