How to benefit from the new Residence Nil Rate Band (RNRB)

Chris Street

30th September 2017


By Louise Misiewicz

Are you aware of the new Residence Nil Rate Band (RNRB)?

What impact does this have on your wealth management?

One of the main areas my investor clients speak to me about on a weekly basis is new legislation in place around inheritance tax, and the introduction in April of the Residence Nil Rate Band (RNRB).

This new piece of property and wealth management legislation, brought in to provide an extra allowance on inheritance tax liabilities of £100,000 for property investors, is causing lots of debate in our office.

But what’s the big deal around RNRB, and why should you pay attention as a property investor? Let’s take a closer look, to ensure that your wealth management is benefitting fully from this new piece of regulation.

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Whilst there’s been no change to the inheritance tax threshold since 2009, the introduction in April of the new property allowance means an investor can now pass on an extra £100,000 tax-free if leaving a home to a child or grandchild.

Called the main Residence Nil Rate Band (RNRB), this allowance will rise by £25,000 a year until April 2020 – when it will be worth £175,000.

I’m also advising investors that couples can also pool their allowances, meaning they could leave a total of £1m before any inheritance tax is due.

Even though most estates don’t pay inheritance tax – just seven per cent at the HMRC’s last count – a long-term freeze on the amount you can pass on before IHT is due (£325,000), means that this percentage is likely to rise considerably in the future. Effective tax mitigation planning can help to offset this.

Do you have a tax question that you want answering?

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It is important to also remember that investors won’t have to change a Will to qualify, as the rules state that qualifying beneficiaries extend to the spouse or civil partner of a descendant at the deceased’s date of death. This applies if the descendant has also died, providing the spouse has not re-married.

When it comes to ensuring that wealth management and tax planning is in hand, it’s worth talking to a professional tax specialist and reviewing the current measures in place to protect your financial legacy.
I’ve written a number of other useful articles on wealth management and tax planning, including:

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