From April 2017, you have been able to obtain an extra Inheritance Tax Relief when you leave your main house on death to your direct descendants. It is called the main residence nil-rate bank (RNRB).
The rates increase with each year:
- £125k in 2018 to 2019
- £150k in 2019 to 2020
- £175k in 2020 to 2021
After 2021 it will rise in line with the Consumer Price Index (CPI).
This should reduce the burden of Inheritance Tax for most families by making it easier to pass on the family home to direct descendants without a tax charge. With rising house prices, this is becoming increasingly important. During the last tax year, Inheritance Tax revenues will likely have exceeded £5bn for the first time!
The downsizing rules apply to situations where someone has downsized rules apply to situations where someone has downsized to a less valuable residence and that residence, together with assets of an equivalent value to the 'lost' RNRB, has been left to direct descendants.
The board intention is that an estate would be eligible for the proportion of the RNRB that is foregone as a result of downsizing or disposal as an addition to the RNRB that can be used on death.
It would be known as the 'additional RNRB'.
One disadvantage appears to be the fact that a child or grandchild must actually inherit the house (or share) even if they are under 18 years. This can cause concern that if that child/grandchild dies without a Will - where would the share go?
Estate planning to use tax reliefs appropriately can be complex. It is important to review your Will to ensure you are getting maximum tax relief on your property.
Call to speak about our Estate Planning Service on 01606 74301, Rob Gore would be pleased to assist.