The residence nil-rate band final £25,000 increase is due on 6 April 2020.
What is the residence nil-rate band
The residence nil rate band (RNRB) was introduced by the Chancellor of the Exchequer, George Osborne, from 6 April 2017. The aim of the RNRB was to make it easier for you to bequeath the family home to your direct descendants without being unduly taxed. In other words, to save you inheritance tax.
The residence nil rate band is an allowance in addition to the standard inheritance tax nil rate allowance of £325,000. On 6 April 2020 the residence nil-rate band final £25,000 increase is due. This increase takes it to an additional £175,000 over and above the standard £325,000.
The RNRB was set at £100,000 per person in April 2017 and has increased each April in £25,000 increments. After April 2020 the maximum £175,000 will be reached, and thereafter the RNRB rises in line with the Consumer Price Index.
Why is the residence nil-rate band increase important?
If your estate exceeds the current £325,000 threshold and you wish to leave your home to your children or grandchildren then you would do well to review how your will is currently structured.
Ensure that, if you are eligible, you can take advantage of the RNRB. BUT this allowance applies solely to your residential property, which has been your home, passed to a direct descendent.
Direct descendants qualify if, on the date of your death, they are;
- your children,
- adopted children,
- step children or fostered children,
- your grandchildren,
- the spouses of your children or grandchildren,
- the widowed surviving spouses or civil partners of your children or grandchildren (if not remarried/in a new civil partnership)
This article from Arram Berlyn Gardner – London Chartered Accountants, Auditors, Tax Advisers and Business Advisers, explains in more detail the implications of the residence nil rate band increase.
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