During the recent #Budget, the government announced the freezing of the inheritance tax Nil Rate Band (“NRB”) and Residence Nil Rate Band (“RNRB”) thresholds until 2026. What does this mean for you?
Inheritance tax is an issue for increasing number of people particularly because the government have just frozen the allowances for a further 5 years even though property and other asset values keep climbing. This means more people will fall in to the taxable bracket over the next few years. Having a review of your Will and considering your inheritance tax position is an important step towards using your available allowances in the best possible way.
Currently, upon your death, assuming you are domiciled in the UK, your worldwide assets will be liable to UK inheritance tax. To the extent that your estate exceeds the available nil rate bands as the date of your death, inheritance tax will be charged at a flat rate of 40%.
Basic nil rate band
For each person, assets up to the value of the ‘nil rate band’ will suffer no charge to tax because the tax rate on that band is 0%. The nil rate band is currently £325,000 and will be frozen as that rate until 2026.
Residence nil rate band
There is now an additional nil-rate band available affecting deaths on or after 6 April 2017 when a residence is passed on death to a direct descendent. This will be a 0% inheritance tax charge on £175,000 and is frozen as that rate until 2026.
There are some complex rules about qualifying for using the tax allowances and for transferring unused parts of them. How your Will is drafted will affect what allowances can be claimed.
Our experienced team of Life Planning specialists would be pleased to help you review your Will and advice you on estate and inheritance tax planning. Please call for further information on 01904 624903.
For more information about the thresholds please click here to visit the government website Inheritance Tax nil rate band and residence nil rate band thresholds from 6 April 2021 – GOV.UK (www.gov.uk)