Theresa Mills
Solicitor
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Date Published:21 Apr 2017 Last Updated:14 Apr 2021

Residence Nil Rate Band

Wills, Trusts & Probate

The recently introduced Residence Nil Rate Band has left many people with a lot of questions about how it impacts their current inheritance tax planning, especially in light of articles in high profile newspapers articles. We have tried to answer a few of the common questions below:

Is the Residence Nil Rate Band just an increase to the Nil Rate Band?

No. The Nil Rate Band still exists and is currently £325,000. The Residence Nil Rate Band is an additional allowance which is currently up to £100,000 (increasing to £175,000 by 2020) it only applies to residential property inherited by lineal descendants (children, grandchildren and step-children are expected to be the most common classes).

It is important to note that if an estate is worth over £2,000,000 then a taper is applied to the Residence Nil Rate Band and it decreases in value by £1 for every £2 over the threshold. If this is applicable to you it is advisable that you consider lifetime tax planning to minimise the exposure of your estate to inheritance tax.

Can I still pass my property to my spouse?

Yes. The Residence Nil Rate Band can be transferred to a spouse and it can be claimed on their death. However, only a maximum of one Transferable Residence Nil Rate band can be claimed so if your spouse is a widow or widower then you may want further advice to maximise the allowances available.

Can it be claimed on more than one property?

No, it can only be claimed on one property.

What if I move into a care home?

So long as the property was lived in by you at some point during your ownership the Residence Nil Rate Band will apply.

Do I need to remove the discretionary trust from my Will?

Not necessarily but this is a good opportunity to review the provisions of your will to make sure that they remain relevant. Clients with discretionary trusts should also take this opportunity to update their letters of wishes so that their executors can take the appropriate action to preserve the Residence Nil Rate Band that would not automatically be available.

If you would like to review your Will or consider lifetime planning in light of the changes in legislation please contact a member of the Wills Trusts and Probate department.