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The following article was first published by New Model Adviser on 5th June.
The start of the new tax year on 6 April meant the introduction of the residence nil-rate band (RNRB), an additional threshold for inheritance tax (IHT) planning above the current £325,000 threshold. The new legislation was as a result of a Conservative party manifesto pledge in 2015.
‘We will take the family home out of inheritance tax for all but the richest by raising the effective threshold for married couples and civil partners to £1 million,’ the Tories pledged two years ago.
The simplest approach would have been to raise the main IHT nil-rate band by £175,000 to £500,000. However, the new rules have created more complexity.
The RNRB is available to estates where the person dies after 6 April 2017 and:
- Leaves an interest in a residential property, which has been their main residence at some point, to their direct descendants on death.
- The direct descendants are children, which includes stepchildren, adopted and foster children, and their direct descendants.
- May include the spouse or civil partner of a direct descendant, or a surviving spouse or civil partner, if not remarried at the time of the deceased’s death.
RNRB is to be phased in over the next four years, so the magical £1 million IHT threshold for a married couple, £500,000 each, will not be a reality until April 2020. (see below table)