Helen Beach- Wills & Estate Planning Solicitor
WILLS: Should be made and regularly reviewed to ensure they are tax efficient and a reflection of your wishes.
On 6th April 2018, not only does the new tax year start but it is also a day for an increase in an inheritance tax exemption that may save your estate thousands of pounds. This not so well known exemption is called the residence nil rate band.
BACK TO BASICS: Each adult has a nil rate band ‘NRB’ of £325,000 – the amount that can be given away on your death free of inheritance tax. There are other exemptions such as spousal exemption, charity exemption, business property relief and agricultural property relief all of which could reduce your inheritance tax liability. These exemptions are complex and will not be discussed in this article. It is the Executors responsibility to declare accurate values of the estate and report these to HMRC.
IF YOU OWN PROPERTY: That is passing to a direct descendant, commonly this is a child or grandchild, but can include a wider category of people that you may not expect it to include, then an application can be made by the Executors for a claim of the residence nil band ‘RNRB’ if the estate is over the basic NRB threshold. The RNRB was introduced in April 2017 and was initially set at £100,000 but this increases to £125,000 from 4th April 2018 (and is increasing by £25,000 each tax year until it is £175,000 in 2021), it will thereafter be increased in line with Consumer Price Index.
HOWEVER: The RNRB is unfair as it cannot be applied to an estate where the individual does not have property or any children to leave property to. For example, an Uncle may wish to leave his estate to his niece and nephew. The estate includes a property and other assets worth over £325,000. The RNRB cannot be applied as a niece and nephew do not qualify for the exemption, potentially resulting in more inheritance being payable.
It is hoped the government will review this policy so as to extend the existing NRB and scrap the RNRB so those that do not have children or property are not unfairly discriminated against.
EXEMPTIONS: Are a complex area and we recommend you seek expert advice to ensure your Will is up to date and tax efficient.
If you would like to review your Will or discuss estate planning generally please contact our First Contact team on 01256 320555 or email email@example.com and if you quote this article we can offer you a complimentary 30 minute appointment to see me or one of my colleagues in the Wills and Estate Planning Team.