Additional Inheritance tax Nil Rate Band
In his Summer Budget, George Osborne trumpeted the arrival of the £1 million ‘nil rate band’ (NRB). The NRB is the maximum amount everyone can leave on their death without paying inheritance tax (IHT). But the £1 million is actually per married couple/civil partners and won’t be available fully for another 5 years!
IHT is often seen as a tax on property. With high value property prices in the South East, if you die owning property in this part of the world, your estate is more likely to have to pay IHT than if you live in the North. The new arrangements should provide at least some relief. But beware of the small print! Here are some of the details which are now known:
1.The current NRB is to remain at £325,000 per person until 2021.
2.There is to be an additional ‘main residence nil rate band’ (MRNRB), from April 2017, which will initially be restricted to £100,000 per person increasing each year until £175,000 is reached in 2020/21. This will take the maximum available IHT free amount, 5 years from now, to £500,000 per person, or £1 million per married couple/civil partners.
3.The MRNRB only applies to a property in which the deceased must have resided at some stage and which passes to a direct descendant of the deceased. A buy to let property, therefore, will not qualify.
4.Like the “normal” NRB, it is to be transferable between spouses/civil partners, if it is unused when the first of the couple dies.
5.If the net estate of the deceased exceeds £2 million the MRNRB will be tapered away at a rate of £1 for every £2 above that limit.
It will no doubt take a while to resolve how the new MRNRB will operate. Taylor Walton will provide further advice on this and other tax related issues. Please don’t forget to keep your Will under review and also get Lasting Powers of Attorney in place if you have not yet done so. Speak to us on all of these matters.
We offer regular free 15 minute drop-in meetings at our Harpenden and St Albans Offices where you can discuss wills, tax planning and Power of Attorney issues with our experts.