Residential Nil Rate Band

The Residential Nil Rate Band was introduced in April 2017.

Although intended to increase the amount someone is able to leave, before attracting Inheritance Tax, it does not apply to everyone and there are some very important qualifications, which must be met, if an estate is to benefit from this extra allowance.

The main criteria are that you must own a home and it must be passing to direct descendants. So, for example, a gift to a nephew would not qualify for this.

Further complications can arise where, for example, the deceased no longer owns a home, as it was sold to pay care fees, or where they downsized.

Particular care must be taken when drafting Wills, to ensure that the terms of the Will do not fall foul of the stringent requirements.

Assuming as estate qualifies, the extra amount depends on the Tax Year in which the death occurs. Currently, the thresholds are as follows:-

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

For later years, the threshold will go up in line with inflation based on the Consumer Prices Index.

The Residential Nil Rate Band is able to be transferred between spouses, similarly to the Transferrable Nil Rate Band.