On the 8th July 2015 George Osborne announced some expected and some unexpected changes for home owners and landlords. The exact detail of the provisions due to be put in place are yet to be fully expanded upon but the concept that has been introduced is a new Residence Nil Rate Band (RNRB) of £175,000 for an estate if the deceased’s interest in a residential property which has been their residence at some point and is included in their estate is left to one or more direct descendants on death – a direct descendant being a child of the deceased (including stepchild, adopted child or foster child) and their lineal descendants. In a similar way to the current NRB (at the date of print £325,000) the RNRB will be transferrable between spouses and civil spouses giving married couples and those in civil partnership a combined total tax free amount of £1 million. For those in excess of £2 million the RNRB will be reduced by £1 for every £2 of the net value of the estate that exceeds £2 million. It would appear that the RNRB can be allocated to only one property so where there is more than one residence in an estate the Executors will be able to elect which property the allowance should be allocated to. It will need to be remembered that buy to let properties that have never been occupied by the deceased will be excluded. The new RNRB will be phased in over a four year period so individuals will have to wait until 2020/2021 to be able to benefit from the full £175,000 additional allowance. It is proposed that the allowance will then rise in line with the CPI. The allowances will be introduced in the following stages:-
Here at Clarke & Son we can consider your eligibility for the RNRB and the impact on your exposure to Inheritance Tax on your estate even though at the moment we do not have the full information to assess the potential tax impact of the RNRB in full. We can discuss the availability of a transferrable NRB and RNRB with you and your partner. Anyone who wants to downsize to a smaller property will be eligible for an Inheritance Tax credit so that even if they sell an expensive property they should still qualify for the new threshold provided the bulk of their estate is left direct to the aforementioned descendants.
If you have a query or would like to book an appointment please get in touch with our First Contact team on 01256 320555 or email firstname.lastname@example.org