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New Inheritance Tax Relief on Residential Property
In 2007, the Conservative Party proposed increasing the Inheritance Tax Nil-Rate Band to £1 million. The resulting legislation will now, finally, be included in the Finance Acts 2015 and 2016, effective for deaths on/after 6th April 2017. The rules are similar to the existing unused Nil-Rate Band Relief, allowing the unused Residential Nil-Rate Band (“RNRB”) to be carried forward and be used on the death of a surviving spouse/civil partner, where the first spouse dies after 7th July 2015 and the survivor dies after 5th April 2017, subject to the restrictions below. The relief is staggered as follows:-
£100,000 for 2017/18
£125,000 for 2018/19
£150,000 for 2019/20
£175,000 for 2020/21
For the purpose of calculating relief, anybody who died in the period from 8th July 2015 to 6th April 2017 is considered to have an RNRB of £100,000.
The result is that the maximum Nil-Rate Band and RNRB available to the Estate where both parents have died will be £1 million.
However, beware of the limitations! The amount of the RNRB is limited to the value of residence being closely inherited BUT if the value of a person’s Estate (assets less liabilities) exceeds £2 million, the RNRB is reduced at a rate of £1 for every £2 above the threshold (known as the Taper Threshold).
To qualify, the Property must be a residence but does not have to be the main residence. The beneficiary(ies) of the Property can inherit by way of Will or intestacy or even survivorship, and can be children, grandchildren or remoter issue, including stepchildren, adopted children, foster children, spouses and civil partners of children, widows or widowers of predeceased children who have not remarried. There are specific provisions for settled property and Trusts.
Our team of specialist lawyers can provide details advice for those purchasing a Property and considering the Relief, as well as those considering lifetime and death tax planning. Please contact our partners Christopher Johnson, Judith Bleetman and Lucy Thomas at our Cockfosters office on 020 8441 1556 or by email on firstname.lastname@example.org