This is what the was announced in the 2015 Budget:
The new Residence Nil Rate Band (RNRB) will have the effect of … “taking the family home out of inheritance tax for all but the wealthiest with a new transferable nil-rate band, introduced from April 2017. This will apply when a main residence is passed on death to direct descendants, such as a child or grandchild. The allowance will be £100,000 in 2017-18, up to £125,000 in 2018-19, up to £150,000 in 2019-20 and up to £175,000 in 2020-21. This is in addition to the inheritance tax nil-rate band, which is set at £325,000 for the estates of individuals. This creates an effective £500,000 inheritance tax threshold for estates in 2020-21. As with the current nil-rate band, any unused main residence nil-rate band will be transferred to a surviving spouse or civil partner and means the effective inheritance tax threshold will rise to £1 million in 2020-21…”
The really good news is that ‘direct descendants’ will include step-children. It is important to note that the allowance can still be claimed if a Life Interest Trust is included in your Will (in simple terms your share of your home will go into Trust if you die first thus protecting it for your children, but your spouse will be able to stay in the house). As long as, on second death, it will pass to direct descendants the RNRB will still be available for use with this type of Trust.
The way the ‘wealthiest’ is currently defined is anyone who has an estate exceeding £2 million (this will stay at the same level until 2020-21 when it will be increased in line with the CPI). If the net estate is more than £2 million the RNRB will be tapered away at a rate of £1 for every £2 over the taper threshold.
If you would like to know more about this change in legislation, please contact us on 01438 746977 or email email@example.com.