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New Residential Nil-Rate Band for Inheritance Tax

Calculating Inheritance Tax

As of 6th April 2017, individuals may be able to “top up” their Nil Rate Bands (currently £325,000 for individuals or £650,000 for married couples which is inheritance tax free on their estate) to £500,000 for individuals or £1,000,000 for married couples. Our Wills and Probate Team are regularly involved in tax and estate planning. This article explains more on what the residential nil band is and who can take advantage of it.

What is the Nil Rate Band?

The Nil Rate Band is the value of an estate which is not subject to inheritance tax in the United Kingdom. It is sometimes known as the basic Inheritance Tax Threshold.

Who is the Residential Nil Rate Band available to?

The residential nil rate band is available to anyone who leaves their residential home or a share of it to their direct descendants in their Will. Direct descendants include child or grandchild (including step children and adopted children) or a spouse or civil partner of that direct descendant.

This is only available on deaths occurring on or after 6th April 2017.

Who will the new Residential Nil Rate Band benefit?

The residential nil rate band is available to anyone whose estate is worth more than the current Nil Rate Band, this can be added to their Nil Rate Band and by April 2020 an individual could have £500,000 Inheritance Tax free as long as their residential home or a share of it is left to their direct descendants in their Will.

How will this come into effect?

The amount available will increase yearly and will be phased in as follows:

2017-2018 £100,000
2018-2019 £125,000
2019-2020 £150,000
2020-2021 £175,000

When is this not available?

The New Residential Nil Rate Band is not available to individuals who do not have direct descendants to leave their estates to. If you do not have direct descendants then you will only be able to make use of your Nil Rate Band of £325,000 or £500,000.

If your estate is worth over £2,000,000 then the Residential Nil Rate band may also be lost.

 

For detailed bespoke legal advice on your estate, whether you have a Will in place or want it reviewing, then please contact our Wills and Probate team below. 

Sandra Danaher
Associate
Market Harborough
01858 462 462
Louise Tow
Senior Probate Executive
Syston
0116 344 0210
Sharon Fradsham
Legal Assistant
Coalville
01530 835 041
Liz Woodward
Probate Executive
Coalville
01530 835 041
Pierce Arnold
Trainee Solicitor
Blaby
0116 2643430
Emma Longstaff
Trainee Solicitor
Leicester
0116 2551811