Inheritance tax on your home
The total amount of inheritance tax (IHT) paid to the UK Treasury increases by around 10% per year. This is largely due to rising residential property values and is frozen at £325,000 per person. IHT is payable at 40% above the nil band.
If you have children (step or adopted children count) some IHT may be saved by leaving an interest in your family home to one or more of your direct descendants. Such bequests allow the residential nil rate band (RNRB) to come into play, which is currently worth £125,000 per person, increasing to £175,000 from 6 April 2020.
The RNRB is added on to the normal nil band, to provide a total exemption of £500,000 per person (from 6 April 2020). This total exemption can be passed to the surviving spouse on death.
However, there are lots of conditions surrounding the RNRB. The interest in the property must pass to your direct descendant on death and not as a lifetime gift. If your total estate before exemptions and reliefs is worth over £2 million, the RNRB is tapered away by £1 for every £2 over that threshold. It therefore pays to plan to reduce the value of your estate down to £2 million, if that is possible.
Talk to us about planning to reduce the tax which will be payable on your death.