Inheritance Tax – what is the Nil Rate Band and how does it apply?
When a person dies, a certain portion of their estate is considered to be free of Inheritance Tax. The maximum Inheritance Tax allowance a single person has is £325,000. It has been frozen at this amount since 2009 and this is what we call the Nil Rate Band (NRB).
If you own a residential property, there is also an extra Inheritance Tax allowance called the Residence Nil Rate Band (RNRB). The RNRB is frozen at £175,000 but this allowance only applies where your residential property, which must be your main matrimonial home, is being left to direct descendants (e.g. children or grandchildren).
Many people agree that the RNRB should apply regardless of who a person leaves their property to. The Government will be reviewing this later this year and there is potential for this rule to change.
For a married couple, when the survivor of them dies, they may use their own NRB and RNRB alongside any unused NRB and RNRB that their spouse had at their date of death.
The Government has created a RNRB calculator to check if you are eligible to use the RNRB:
If you think that your estate would be liable to Inheritance Tax and are worried about it, call one of our friendly team on 01937 227 830 or email enquiries@htf-legal.co.uk