HMRC have now published some welcome guidance on the new inheritance tax allowance (the residence nil rate band or RNRB for short) where property is passed on to children or grandchildren (direct descendants) applying to deaths from April 2017. This is the allowance highly publicised in the press as granting a £1 million allowance on inheritance tax. In reality it does mean that by 2021 when it is fully phased in a couple could jointly potentially have a total nil rate band of £1 million where they meet the criteria. This would however depend on obtaining professional advice in particular on the structuring of their wills.
An estate will be entitled to the RNRB if the: individual dies on or after 6 April 2017 individual owns a home, or a share of one, so that it’s included in their estate individual’s direct descendants such as children or grandchildren inherit the home, or a share of it value of the estate isn’t more than £2 million An estate will also be entitled to the RNRB when an individual has downsized to a less valuable home or sold or given away their home after 7 July 2015. The maximum available amount of the RNRB will increase yearly . For deaths in the following tax years it will be: £100,000 in 2017 to 2018 £125,000 in 2018 to 2019 £150,000 in 2019 to 2020 £175,000 in 2020 to 2021