There is a tax-free allowance called the ‘nil-rate’ band. This is currently £325,000 (fixed until April 2021). In general terms, if the value of the estate exceeds this figure, and the estate isn’t left to a spouse or civil partner or to a charity, (and isn’t eligible for reliefs such as agricultural or business relief) then the excess will be liable to IHT at 40 per cent.
From April 2017, estates are set to benefit from an additional residential nil-rate band (RNRB) of £100,000 (rising to £175,000 by April 2020) where the deceased’s residence is left to their direct descendants (children, step-children, adopted and fostered children and their respective spouses and civil partners). Where an estate has a net value of more than £2m, the RNRB is withdrawn at a rate of £1 for every £2 over this threshold.
From 2020, if the nil-rate band and RNRB are both rolled over unused on the first death to the surviving spouse or civil partner, on the second death this would mean there would a tax-free nil rate band of £1m available.
The rules involved in inheritance tax are complex and it is for this reason alone it is important to discuss your situation with us, as only then will you be able to understand its potential effects on you, whether your loved ones will lose out on some of their inheritance and, more importantly, what can be done through us to reduce or even eliminate its effects.
INHERITANCE TAX PLANNING, WILL WRITING, TRUSTS AND TAXATION ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.