The much talked-about Residential Nil Rate Band will come into effect in the new tax year, in about a month’s time.
The RNRB will allow you to pass down your main residential home to your direct descendants, which includes children, adopted children, step-children, foster children or children under guardianship with you, if you die after 6 April 2017.
The RNRB will start at £100,000 in 2017 and will increase as follows:
- £100,000 in 2017–2018
- £125,000 in 2018–2019
- £150,000 in 2019–2020
- £175,000 in 2020–2021
After 2021 it will increase in line with inflation.
It is worth noting that the “carry forward” spousal rule that applies to the Nil Rate Band also applies to this new allowance, and is based on the RNRB level at the time that the second person dies. So, even if your partner passed away before April 2017, you could still use their allowance when you pass away at some future point.
As always, there are rules! For those with an estate worth more than £2 million, the RNRB will start to reduce by £1 for every £2 above £2 million. This means that on an estate worth £2.35 million, one person’s RNRB will be lost, and on an estate worth £2.7 million, the RNRB will not apply at all. Unlike the NRB, the RNRB allowance cannot be tranferred to trust or utilised in any way during your lifetime.
So what do these changes mean to you? Well, if you have Wills that direct your estate into trust on your death, then you will need to make some changes to your Will.
Those of you who receive our Annual Trustees Minutes every year (around December normally) do not need to take any action, as these minutes cover the additional legislation required. For those who do not receive our Annual Trustee Minutes, additional changes will be needed and these are the responsibility of the person appointed to complete your Trustee Minutes.