You have probably by now heard about the Residential Nil Rate Band (RNRB), which has also been referred to as the Main Residence Nil Rate Band or simply the family home allowance. This new allowance was announced in the Summer 2015 Budget and will take effect from 6 April 2017.
The RNRB will be an additional allowance to the current Nil Rate Band (NRB) which currently stands at £325,000 and will be frozen at this figure until the end of 2020 to 2021. The RNRB will be introduced in stages until it reaches the full amount of £175,000 after 6 April 2021. The new allowance will be phased in as follows:
- £100,000 for 2017 to 2018
- £125,000 for 2018 to 2019
- £150,000 for 2019 to 2020
- £175,000 for 2020 to 2021
This will mean that by 2020-21 married couples and civil partners may pass on up to £1 million worth of assets to their children and grandchildren free of Inheritance Tax.
The RNRB will be limited to only one residential property. If you own more than one property then your personal representative will need to elect one qualifying property. To qualify for the allowance a property must currently be your main residence or have been used as your main residence at one point. The property that you own as a buy to let and have never used as your residence will NOT qualify for RNRB.
A property must be 'closely inherited' by Will or under the rules of Intestacy. 'closely inherited' here means that the property must be inherited by your children, grandchildren or other lineal descendants. This also includes your step-children, adopted children, children of whom you have been appointed guardian of, and also fostered children.
If the net value of your estate is over £2 million (the taper threshold) then the RNRB will be reduced by £1 for every £2 that the net value of your estate exceeds £2 million.
Finally, the RNRB may be transferred in the same manner as the NRB. On the death of a surviving spouse or civil partner their personal representatives may apply for any unused RNRB to be transferred.
These matters are complex and if you wish to discuss any of the implications above and how it will affect your family please do get in touch with us. We are here to help.
3 January 2016
The views expressed in this blog do not in any way constitute advice and are specific to the date noted. As time passes the facts can change and readers should consult their adviser for up to date advice on any matters covered within the blog. Invest Southwest offers an initial review, which is free of charge, however long it takes. From this we will be able to confirm how we can help and give you an opportunity to decide if you would like us to. Thereafter, we will provide you with detailed recommendations and exact costs. Please note that we promise not to levy any kind of fee unless we can demonstrate a benefit to you.