For those eligible to use it, it will be in addition to the standard nil rate band (NRB), currently £325,000 (and frozen at that level until April 2021).
In summary, the RNRB is intended to protect some or all of the value of the family home (or previous family home) from inheritance tax where the home (or, if the home has been disposed of, assets of equivalent value) is being passed on to children or grandchildren (or their spouses).
The RNRB will be phased in gradually from 2017/18 to 2020/2021 as follows:
- £100,000 per person in 2017/18
- £125,000 per person in 2018/19
- £150,000 per person in 2019/20
- £175,000 per person in 2020/21
- and then increasing in line with CPI in subsequent years
The RNRB can be offset against the value of a property which has, at some time, been occupied as the family home as long as that home passes on death to the direct descendants of the deceased.
A direct descendant is defined as a child (including step-child, adopted child or foster child) or grandchild of the deceased. This includes the situation where the property is left to a direct descendant and their spouse or civil partner jointly, to a direct descendant’s spouse or civil partner solely, or to a direct descendant’s widow, widower or surviving civil partner who has not remarried or entered into another civil partnership at the time of death of the deceased.
The RNRB will be available when the individual dies on or after 6th April 2017. The transfer must be on death and can be made by will, under intestacy or as a result of the rule of survivorship.
An estate will be eligible for the proportion of the RNRB that is foregone as a result of downsizing or disposal of the property as an addition to the RNRB that can be used on death. In the Government Technical Note this is referred to as the ‘additional RNRB’. The qualifying conditions for the additional RNRB would be broadly the same as those for the RNRB.
Clearly there is a lot more to it than this so do take professional advice and not rely upon a limited knowledge of the rules. And ensure that you will including your living will, are up to date ~