Residential Nil Rate Band? What is that and how can someone qualify for this additional relief from inheritance tax? Laura Richardson provides the answers . . .

With Inheritance Tax set at the staggering rate of 40% it is no wonder that many Braintree residents are consulting with Estate Planning experts in order to try and minimize the Inheritance Tax liability on their Estate. There are many Inheritance Tax reliefs available, but they come with a long list of strict criteria and conditions creating somewhat of a minefield of this area of the law, not least because making errors in the calculating of Inheritance Tax payments can lead to hefty fines and even legal prosecution!

The good news is that everyone qualifies for the standard Nil-Rate Band relief which currently allows each individual to pass on £325,000 worth of assets without incurring an Inheritance Tax liability.

If your estate is worth more than £325,000 then it is worth considering whether your Estate would qualify for any additional Inheritance Tax relief. One of the more popular Inheritance Tax reliefs, known as the Residence Nil Rate Band relief, applies if you leave your ‘main residence’ to your direct descendants. If your Estate satisfies the criteria for Residence Nil Rate Band your Executor can claim up to a further £175,000 of Inheritance Tax relief on your Estate! This could potentially save your beneficiaries a massive £70,000!

The rules surrounding this particular relief are remarkably flexible in that a ‘main residence’ can include any dwelling that you used as your main residence at some point, however briefly. Furthermore, ‘direct descendants’ can include your children or grandchildren, including adopted children, foster children, and step-children, as well as the spouse, civil partner of a lineal descendant. The flexibility of this particular Inheritance Tax relief may make this an incredibly attractive option to many Braintree residents, especially as the current £175,000 cap is set to increase in line with the Consumer Price Index as of the 2020/21 tax year.

However, as with all Inheritance Tax reliefs, there are some stipulations and restrictions in the application Residence Nil Rate Band and therefore it is highly advisable to consult with a suitably qualified Estate Planning specialist who can discuss this and other potential options for lessening the Inheritance Tax liability of your Estate.

At Andrew Douglas Wills & Legal Services we specialize in this complex area of the Law and as such we are proud to offer an expert Estate Planning service backed by a wealth of experience in order to ensure that your chosen beneficiaries will receive the most possible from your Estate after you pass on. Andrew Douglas Wills & Legal Services remain fully operational during the Covid-19 pandemic, so whether you are in Braintree or the surrounding areas of Essex call today to arrange your free initial consultation.

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