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How the Residence Nil Rate Band could benefit your children when you die

View profile for Heather Nuttall
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The amount you can currently pass on to your children when you die without being liable for inheritance tax is £325,000.

This is known as the Nil Rate Band. Amounts over this threshold are taxed at 40% (with a few exceptions such as gifts to charities). Gifts you make during your lifetime which exceed £3,000 in any tax year might reduce your individual Nil Rate Band you die.

Impact of the Residence Nil Rate Band

The Residence Nil Rate Band - which came into effect in April 2017 - introduced a further £100,000 to the band. This figure is set to increase to £175,000 over the next three years. So, by 2020, each individual will have a maximum allowance of £500,000 (£325,000 + £175,000), which, if transferred to a surviving spouse, will give them an allowance of up to £1m to offset against inheritance tax.

The allowance - which reduces for larger estates - only applies to homes passed on to direct descendants (although the home does not have to be passed on directly and can be left in certain trusts).

The allowance can be used to pass on one residential property from your estate (different rules apply to properties you have never lived in, such as buy-to-let properties). It’s also worth bearing in mind that the contents of your will may affect the availability of the allowance.

To ensure you benefit from all available allowances and for expert advice with end-of-life financial planning, speak to our Probate teams in Halifax, Huddersfield or Brighouse.

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