If you want to leave money or property to loved ones, make sure to think about Inheritance Tax (IHT).
Each year the government sets two IHT thresholds called:
• The Nil Rate Band, set at £325,000 per person, fixed at £325,000 until April 6, 2021
• The Residence Nil Rate Band, which is £100,000 in 2017/18 and will increase as shown in the table below
Where you are eligible, if your estate is worth less than these, it may not be subject to inheritance tax Usually anything above these bands will be taxed at 40% (unless at least 10% of the deceased's estate has been left to charity, then the rate is 36%).
Residence Nil Rate Band
The Residence Nil Rate Band was introduced from April 6, 2017 and this can be added to the existing £325,000 band where a home (or the proceeds from a previous home) is left to children (including step, foster and adopted children), grandchildren or great grandchildren.
Future increases to the Residence Nil Rate Band mean that by April 6, 2020 eligible individuals will have the potential to pass on assets worth up to £500,000 without paying any Inheritance Tax.
This is being phased in as follows:
||Additional residence nil rate band
||Existing nil rate band
||Potential combined nil rate band for an individual
||will increase in line with the Consumer Price Index
For married couples and civil partners, the total could be up to £1 million if they are eligible. However, there is a gradual withdrawal of this relief for estates worth more than £2 million which means that in 2020/21 there is effectively no additional band for estates over £2.35 million and couples with estates worth more than £2.7 million. For more information see GOV.UK Residence Nil Rate Band (RNRB)