From 6th April 2019..

…the start of the new tax year, the residence nil rate band (RNRB) threshold increases by £25,000 per person, increasing it to £150,000 which can be added to your personal IHT threshold of £325,000 to be left, tax-free to your descendants.

Leave another £25,000 to your descendants Tax Free

Leave another £25,000 to your descendants Tax-Free

This extra £150,000 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.

 

Inheritance Tax

Inheritance Tax is a tax charged at usually 40% on any part of your estate that exceeds your personal allowance of £325,000.

This 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 remaining spouse, will apply to deaths from 6 April 2009 – 5 April 2021.

 

The Residence Nil Rate Band (RNRB)

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 £25k 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 the 2nd spouse to die
Without residence Nil rate Band With residence Nil rate band
2017/18 £325,000 £100,000 £425,000 £650,000 £850,000
2018/19 £325,000 £125,000 £450,000 £650,000 £900,000
2019/20 £325,000 £150,000 £475,000 £650,000 £950,000
2020/21 £325,000 £175,000 £500,000 £650,000 £1,000,000

 

For larger estates the allowance is tapered, reducing by £1 for every £2 that the estate is valued at over £2m.

If you would like to know more about Inheritance Tax planning or making your Will, get in touch with us at Just Wills and Legal Services 01342 477102   to book a free consultation.

 

 

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.

This article has been provided by Just Wills & Legal Services Ltd one of the leading home visit Wills, Estate Planning and Probate services in the country.