From this April, the residence nil-rate band will be available on death where an individual is leaving their residence to direct descendants. It will help many individuals with estates above £325,000 or spouses benefitting from the full transferrable nil-rate band with estates above £650,000 on second death. However, conditions apply and it's tapered for estates over £2 million.

KEY POINTS

The RNRB provides an additional nil-rate band where an individual dies on or after 6th April 2017, owning a residence which they leave to direct descendants.

The 2017/2018 the maximum RNRB available is £100,000. This rises in £25,000 increments in subsequent tax years until it reaches £175,000 in 2020/2021, after which it will be indexed in line with the consumers prices index.

The RNRB is set against taxable value of the deceased's estate - not just the value of the property. Unlike the existing nil-rate band (NRB) it doesn't apply to transfers made during an individual's lifetime.

For married couples and civil partners, any unused RNRB can be claimed by the surviving spouse's / civil partner's personal representatives (PRs) to provide a reduction against their taxable estate.

Where an estate is valued at more than £2m, the RNRB will be progressively reduced by £1 for every £2 that the value of the estate exceeds the threshold.

Special provisions apply where an individual has downsized to a lower value property or no longer owns a home when they die.

The relevant legislation is contained in Finance (No.2) Act 2015 and Finance Act 2016 and HMRC has issued guidance and a series of case studies illustrating how the RNRB will apply in different circumstances. They're available on the Gov.uk website.

Article taken from TECHTALK APRIL 2017