IHT changes – residence nil rate band

From 6 April 2017, there will be an additional inheritance tax free 'residence nil rate band' available. This will begin at £100,000 in the tax year…

From 6 April 2017, there will be an additional inheritance tax free 'residence nil rate band' available. This will begin at £100,000 in the tax year 2017/18 and will increase by £25,000 each tax year, reaching £175,000 by 2021. This “residence nil rate band” is available where the deceased leaves a property (or the proceeds of sale of a property), in which they have lived at some point, to their direct descendants (children/grandchildren etc.).

The residence nil rate band is available on top of the existing inheritance tax nil rate band of £325,000. If the estate is passed to the deceased’s spouse, that cumulative estate will potentially have two nil rate bands available, totalling £650,000, plus two residence nil rate bands, totalling £350,000. This will take some people out of inheritance tax altogether.

The amount of residence nil rate band available will be tapered for estates worth more than £2 million and from 2020/21 will not be available at all on estates worth more than £2.7 million.

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