Inheritance Tax, NRBs And The Rise Of Gifting | Have you updated your will recently? |
POSTED BY HELEN BEAUMONT ON 26/05/2017 @ 8:00AM
The dreaded Inheritance Tax (IHT) is no longer just a tax on the rich. With house prices continuing to rise, much of middle England are being caught in the IHT net ...
Depending on the size of your estate, Inheritance Tax may apply! copyright: ginasanders / 123rf stock photo
Most individuals have a threshold below which their estate does not have to pay Inheritance Tax. That threshold, which is known as the Nil Rate Band (NRB), is £325,000. The NRB can be transferred between spouses and civil partners.
"An estate will pay IHT at 40% on anything above £325,000, subject to limited exceptions!"
The NRB has remained at £325,000 since 2009 and will be frozen until the end of the 2020/21 tax year. Since 2009, house prices in the UK have, on average, increased by 38% (from £156,000 to £215,000 according to the Land Registry House Price Index). Properties in Milton Keynes, where our offices are located, have doubled in value since then.
In April we saw the introduction of the Residence Nil Rate Band (RNRB). This will (potentially) provide an additional £100,000 of relief at 40% in 2017/18 to parents looking to pass on a home to their children and grandchildren.
This will increase annually and, by 2020/21, families could escape paying IHT on up to £1m of their wealth as each parent will have a NRB of £325,000 plus an RNRB of £175,000.
"The RNRB is tapered for estates worth more than £2m!"
However, the rules are complex and without careful planning, many families will find that they miss out on this relief.
As an example, those who have not reviewed their will for several years should do so as a matter of urgency. If their will leaves the home to a Discretionary Will Trust, for the benefit of futures generations, this will not qualify for the RNRB.
Business owners are particularly vulnerable to the loss of the RNRB. Most businesses can be passed on free from IHT because they qualify for the hugely valuable relief called Business Property Relief. However, even when this is the case, its value will be included in the value of an estate for the purposes of the RNRB, potentially pushing them above the £2m hurdle.
"This is likely to make gifting during a lifetime more popular!"
Now is a good time for homeowners to take stock of their financial affairs and, as always, professional advice should be sought. If you'd like a chat about Inheritance Tax then call me on 01908 774323 or click here to send me an email enquiry and let's see how I can help you.
Until next time ...
HELEN BEAUMONT
More about Helen Beaumont ... |  | Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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