From today you can leave another £25,000 to your descendants TAX FREE!
As of today, 6th April 18, the start of the new tax year, the residence nil rate band (RNRB) threshold increases by £25,000 per person, increasing it to £125,000 which can be added to your personal IHT threshold of £325,000 to be left, tax free to your descendants.
This extra £125,000 only applies If part of your estate being bequeathed is your residence and is been left to a direct descendant i.e. a child (including a step-child, adopted child or foster child) and their lineal descendants.
The Inheritance Tax threshold (the amount you can leave to anyone tax free) has been frozen until the tax year 2020/21. So, the thresholds of £325,000 pp or £650,000, if the deceased’s IHT threshold is passed onto the 2nd spouse, will apply to deaths from 6 April 2009 – 5 April 2021.
From 2017/18, an extra residence nil rate band (RNRB) was added. That was £100,000 pp. in 2017/18 rising by £25,000 pp. at the start of each new Tax year (6th April) to £175,000 pp. in 2020/21.
Just as the existing nil-rate band unused by a spouse can be transferred to the surviving spouse, doubling their IHT threshold so can the residence nil rate Band – ultimately meaning a widow / widower could leave their descendants up to £1,000,000 tax free after 5th April 2020. (see the table below).
The Residence Nil Rate band threshold will increase by £25,000 pp.
at the start of the new tax year (6th April)
|Tax Year of death||Nil-rate band||Residence nil rate band||Maximum Nil-rate band||Maximum Nil-rate band for 2nd spouse to die|
|Without residence Nil rate Band||With residence Nil rate band|
If you would like to know more about Inheritance Tax planning or making your Will, book a free consultation with one of our legal experts – book online or call 01342 477 102 and quote ‘RNRB increase‘.
This article is for general information only and does not constitute legal advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.