Residence Nil Rate Band
On 6th April 2017, the Residence Nil Rate Band (RNRB) was introduced and is available to those who, on their death, leave their main residence to a direct descendent. Initially the RNRB will be £100,000 per individual, rising to £175,000 by the beginning of the 2020/21 tax year, potentially allowing married couples to pass £1m of their estate value to beneficiaries free of Inheritance Tax (IHT).
Increases in the RNRB
The RNRB will increase per individual as follows:
| 2017/18 | £100,000 |
| 2018/19 | £125,000 |
| 2019/20 | £150,000 |
| 2020/21 | £175,000 |
| 2021/22 onwards | The value will increase in line with CPI |
The RNRB will be offset against the value of the property before the standard Nil Rate Band.
Tapering
Estates over £2m will see their RNRB tapered by £1 for every £2 over the threshold, meaning that the RNRB is lost once an estate is over £2.2m (individual) or £2.4m (couple) applicable to the 2017/18 tax year. Estate values are based on all assets less liabilities immediately before the individuals death. The tapering of the RNRB is applied before any exemptions or reliefs, meaning that qualifying assets for Business Property Relief (BPR) and Agricultural Property Relief (APR) form part of the estate when determining and applying the taper. Any lifetime transfers made within 7 years of death are not included.
Qualifying descendants
The RNRB only applies to transfers made directly to children, grandchildren (and spouses thereof) and trusts, provided the beneficiaries are treated as owning the trust asset (therefore excludes discretionary trusts). Consequently, those without children are prevented from benefitting.
Provisions for downsizing / sales
Downsizing provisions may apply where an individual, on or after 8th July 2015, has sold, given away or downsized to a less valuable property. In order to claim under this provision, some of the estate must be left to qualifying individuals and will be limited to the lesser of the amount of estate bequeathed or the value of the RNRB in the tax year of death.
Transfers on death
The RNRB is transferable between spouses and is also available when the first death occurred prior to its introduction. There is also no requirement for the first to die to have owned a qualifying residential interest at the time of their death.
This summary provides an overview of the Residence Nil Rate Band, if you think that your circumstances may need reviewing in light of its introduction, please contact us for further clarification or advice.