Details of IHT changes released

October 28, 2015

HMRC have published a technical note covering the proposals, announced in the Summer Budget 2015, to phase in a new residence nil-rate band (RNRB) from 6 April 2017 when a residence is passed on death to a direct descendant.
The proposed rate bands are:
£100,000 in 2017-18
£125,000 in 2018-19
£150,000 in 2019-20
£175,000 in 2020-21

It is proposed that from 2021-22 the band will rise in line with the consumer price index (CPI).

Broadly, the proposals mean that where part or all of the RNRB might be lost because the deceased has downsized to a less valuable residence, or has ceased to own a residence, the lost RNRB will still be available, providing certain qualifying conditions are met (see below). The intention is that an estate will be eligible for the proportion of the RNRB that is foregone as a result of downsizing or disposal of the property as an addition to the RNRB that can be used on death.

If the proposals are enacted, the qualifying conditions for the additional RNRB will be broadly the same as those for the RNRB, that is the:

 

  • individual dies on or after 6 April 2017;
  • property disposed of must have been owned by the individual and it would have qualified for the RNRB had the individual retained it;
  • less valuable property, or other assets of an equivalent value if the property has been disposed of, are in the deceased’s estate (this includes assets which are deemed to be part of a person’s estate);
  • less valuable property, and any other assets of an equivalent value, are inherited by the individual’s direct descendants on that person’s death.

 

In addition, under current proposals, the following conditions will also apply:

 

  • the downsizing or the disposal of the property occurs after 8 July 2015;
  • subject to the condition above, there will be no time limit on the period in which the downsizing or the disposals take place before death;
  • there can be any number of downsizing moves between 8 July 2015 and the date of death of the individual;
  • downsizing will also include disposing of part of a property (including land occupied and used as a garden or grounds) or a share in it;
  • where a property is given away, assets of an equivalent value to the value of the property when the gift was made must be left to direct descendants;
  • the value of the property will be the net value i.e. after deducting any mortgage or other debts charged on the property;
  • the additional RNRB will be tapered away in the same way as the RNRB if the value of the estate at death is above £2m;
  • the additional RNRB will be applied together with the available RNRB, but the total for the two will still be capped so that they do not exceed the limit of the total available RNRB for a particular year; and
  • a claim will need to be made for the additional RNRB in a similar way that a claim is made to transfer any unused RNRB to the estate of a surviving spouse or civil partner.

 

The technical note, entitled Inheritance Tax on main residence nil-rate band and downsizing proposals provides further details of the proposals and gives some useful examples to illustrate how they will apply. Responses to the note, which are requested by 16 October 2016, will inform the draft legislation to be included in the Finance Bill 2016.

If you have any queries regarding inheritance tax levels or legal planning of your estate, please contact the Watsons probate team.

Alex Mitchell is Partner and Member of the Probate Department at Watsons Solicitors.

The technical note can be found here: https://www.gov.uk/government/publications/inheritance-tax-on-main-residence-nil-rate-band-and-downsizing-proposals-technical-note/inheritance-tax-on-main-residence-nil-rate-band-and-downsizing-proposals-technical-note

Contact Us

If you are interested or require any information on any of our services then please get in touch for an appointment on:

 01925 571 212
Mon-Fri: 9am - 5pm

Latest News

Cheshire family law solicitors hit the 'gold standard'

A leading Warrington law firm’s family department has secured two further additions to the “gold standard” of practice. Gill Lacey and Amy Jones of Watsons Solicitors have received accreditation to sit on the Law Society Children Law Panel after demonstrating required level of competence and knowledge in representing clients in Children Law proceedings. In doing […]

You’ve appointed your conveyancing solicitor – now what?

You’ve found your dream home and your mortgage offer has been accepted, but there’s still some crucial steps before you get the keys. Appointing a conveyancing solicitor is a vital milestone in the house buying or selling journey – but what activity follows this? We’ve created a checklist to help prepare you and ensure you […]

Double joy for Lauren as she joins leading Warrington law firm permanently

A newly-qualified solicitor has secured a permanent role at a growing Cheshire law firm. Lauren Singh joins Watsons Solicitors after completing her two-year training contract with the Warrington-based company and will split her time between the employment law and family law departments. Her appointment further bolsters the firm’s ever-growing team of young solicitors as it […]

Warrington wills solicitor’s concerns about video-link risks

A Warrington-based wills and probate solicitor has expressed concern over imminent changes to allow wills to be executed via video link. The change in the law due in September, which will be backdated to 31 January 2020, is part of the government’s response to making it possible for the signing of wills to be witnessed […]

Watsons Solicitors
Children Law Accredited
Conveyancing Quality
Criminal Litigation
Family Law Advanced
Personal Injury

Watsons Solicitors is a trading name of Watsons Solicitors Warrington LLP a Limited Liability Partnership registered in England and Wales registered number OC386012 whose registered office is 13 Bold Street, Warrington, WA1 1DJ.

Watsons Solicitors Warrington LLP is authorised and regulated by the Solicitors Regulation Authority number 598547.

Watsons Solicitors
Warrington
Cheshire
WA1 1DJ

01925 444 323
Website managed by Outwrite PR, an online reputation management agency
envelope-oclock-ophonefax linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram