In 2015 it was announced that a new Inheritance Tax (IHT) threshold would be introduced to account for rising house prices.
Introduced in 2017, the Residence Nil Rate Band (RNRB) has gradually increased by £25,000 annually to help reduce the number of families affected by IHT.
As of 6 April 2020, this allowance combined with the existing nil-rate band allowance of £325,000, means that up to £500,000 can be passed to direct descendants by an individual or up to £1 million for a couple.
Now is an opportune moment to review your estate to see whether you are taking full advantage of the current IHT allowances.
The RNRB applies, subject to certain restrictions, if you had a property which you had at some time used as a dwelling and that you passed on either to a surviving spouse or directly to your lineal descendants. Descendants include not only children and grandchildren but also adopted or step-children.
To benefit from the allowance your estate must also be valued at no more than £2 million. If your estate is worth more than £2 million then for every £2 above that amount you lose £1 of the relief.
Under the RNRB, you can also benefit from the allowance if you have downsized or disposed of the property before your death, for example, if a person sold their property or gifted it away and moved into a nursing home, as long as proceeds are passed to direct descendants. In light of these conditions and the increase in the RNRB, you should check the current provisions of your Will to ensure that your family can enjoy the full benefit of the RNRB. This may involve some restructuring of your current assets and