During the Budget in November, the government announced the freezing of the Nil Rate Band (“NRB”) and Residence Nil Rate Band (“RNRB”) thresholds until 2027-2028. What does this mean for you?
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 2027-28. This means that the nil rate band will have been frozen at this rate for nearly two decades.
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 again, this is frozen as that rate until 2027-28.
For more information please click here to visit the government website (Work out and apply the residence nil rate band for Inheritance Tax – GOV.UK (www.gov.uk))
It would be good to obtain tax planning advice given the further freezing of the IHT allowances. If you would like tax planning advice please contact our friendly Life Planning Team on 01904 624903.