From April 2017 HMRC began phasing in the ‘residence nil rate band’ which could mean large savings on inheritance tax bills for future generations. From 6 April 2020 it’s worth £70,000 per estate – so a whopping £140,000 of tax ready to be saved per couple.
However, there are potential stumbling blocks as with most tax legislation. In particular, there are two situations where this valuable relief will not be due:
- Where the home is not passed down the bloodline. In this context bloodline includes children, step-children, adopted children, foster children and grandchildren. However the relief will not be due where the home goes into a trust for the benefit of your descendants. A lot of wills were drawn up using discretionary will trusts before the ordinary nil rate band could be transferred between spouses. Such wills should be reviewed now to ensure that they still give the most tax efficient result.
- Where the estate exceeds £2 million the relief will begin to be lost and will disappear completely by the time the estate exceeds £2.2 million at current rates.
What can be done to preserve the tax relief?
- Review your will to ensure it is tax efficient. If you are in any doubt contact Jan Friend so that she can re-assure you or advise you how to convert your will to ensure the relief can be claimed by your executors.
- Review the value of your estate, taking into account any future inheritances you may be due. If the figure exceeds £2 million we would strongly recommend that you consider some estate planning now.
If you would like to book a meeting to discuss estate planning please contact Jan Friend to discuss her availability and our fees for providing inheritance tax mitigation advice. With £140,000 at stake, not to mention the massive amounts that could be saved by taking early action on gifts or IHT friendly investments, we strongly urge that you make estate planning a priority.
The content in this blog is correct as at 15 April 2020. See terms and conditions.