If you want to claim the relief, you must own a residential property (or share in it), and you should have lived there at some point. It also has to be left to your direct descendants such as children, grandchildren or even step-children.
When you have an estate worth over £2 million, the relief is reduced by £1 for each £2 it is worth over that £2 million threshold. Additionally, it only applies to death and does not apply for gifts or other lifetime transfers.
"The Inheritance Tax Residence Nil-Rate Band threshold is £175,000 for the 2021/22 tax year!"
The relief's value is applied to the estate first, then the Nil-Rate Band, which is currently £325,000, is applied. Both the Nil-Rate Band and the Residence Nil-Rate Band are frozen until the 5th of April 2026.
Where the value of the property is below the Residence Nil-Rate Band, the remaining balance cannot be offset against another part of the estate, and the relief can be transferred to a spouse, even if one of them died before 2017. There is also a downsizing addition, so if you sell or give away your home, although the tax calculations are far more complicated.
The Residence Nil-Rate Band relief could be lost if you own no property at the moment of your death or if your direct descendants do not inherit it, such as when it is put in a trust.
Until next time ...
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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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