What You Need to Know About the Residential Nil Rate band (RNRB)
The residential nil rate band (RNRB) was introduced some years ago to help reduce Inheritance Tax bills on the value of residential properties when a person dies.
The Basic Rules
In general, RNRB becomes relevant when the following conditions apply:
- An individual dies on or after 6th April 2017
- That individual owns a home (or a share of one) which is included in their estate
- The direct descendants of the individual (such as any children or grandchildren) are to inherit the home or a share of it
- The total value of the estate does not exceed £2 million
An estate will also be entitled to use the RNRB at the point that an individual has downsized to a less valuable home and their home is sold or given away after 7th July 2015.
The amount of RNRB that can be claimed
The amount of RNRB that can be claimed will be as detailed below:
- £100,000 for deaths occurring in tax year 2017/2018
- £125,000 for deaths occurring in tax year 2018/2019
- £150,000 for deaths occurring in tax year 2019/2020
- £175,000 for deaths occurring in tax year 2020/2021 (until 2024/2025*)
* In the 2021 Budget the chancellor stated that the 2020/2021 band rate would remain frozen until 2025.
What else should I know?
In addition to the above, you should be aware that if any RNRB is unused when an individual dies, it can then be transferred to the deceased’s spouse or civil partner’s estate.
This can also be done even if the first of the couple died before 6th April 2017 (before RNRB was available).
Although it is not necessary for you to make a formal claim if you are eligible for RNRB, you will still need to provide details of the amount you are due with supporting information on the IHT return following a death. In addition, you will also need to make a claim if you wish to transfer any unused RNRB from the estate of a late spouse or civil partner.
Contact THP today
If you would like to talk about a legacy plan and how to mitigate your IHT and make the best use of the RNRB, then our friendly team at THP can help. Give us a call on 0800 6520 025 today to arrange for a free, no-obligation consultation where we can discuss your circumstances in more detail.
About Karen Jones
Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.
With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.
Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”
Karen’s specialist skills:
- Personal Taxation
- Tax Efficient Planning
- Trust Administration