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New Inheritance Tax Rules: the Residence Nil Rate Band

Is your Will compliant?

Cast your mind back to 2007 when the Conservative Party pledged to increase the Inheritance Tax (IHT) threshold to £1m. Has this promise been fulfilled?  Well, kind of but it’s complicated.

The IHT threshold currently remains at £325,000. From 6 April 2017 there will be an additional Residence Nil Rate Band for an estate if an individual leaves a home to their children or other direct descendants when that individual dies. The amount of the Residence Nil Rate Band will be as follows in the coming tax years:

- £100,000 for 2016-17
- £125,000 for 2017-18
- £150,000 for 2018-19
- £175,000 for 2019-20

The effect of the new rules is that in some cases the estate of a surviving spouse will be able pass assets worth up to £1m on their death to certain beneficiaries without be liable to pay IHT.

In basis terms, an estate will be entitled to a Residence Nil Rate Band if:

the individual dies on or after 6 April 2017;
the individual owns a home or a share of a home as part of their estate;
the individuals’ direct descendants such as children or grandchildren inherit the home or a share of it; and
the value of the estate is within the permitted range.

The typical Will giving a grandchild a share of the estate conditional on them attaining the age of 25 and Wills establishing certain types of trusts may jeopardise the availability of the relief.

Individuals who want to take full advantage of this new tax relief should seek professional advice regarding the terms of their existing Will to ensure that it complies with the technical elements of the new rules.

Likewise, executors and trustees will need to carefully consider the impact of these rules even if there is no IHT to pay on an individual’s death as they will have a knock on effect on the amount of the relief that may be transferable to the surviving spouse’s estate on death.


If you would like further information in relation to any of the topics mentioned in this article please contact:



Damian Gorman -  01392 285000