HK Law | LPA week

Children can now receive 1 million pounds Inheritance Tax Free from their parents

| Published on April 21, 2020

In April 2017 the Government introduced what has now become commonly known as the Residence Nil Rate Band. A relief, in addition to the (general) Nil Rate Band, for couples who leave their residence to their children.

In 2017 the maximum Residence Nil Rate Band available was £100,000 per person. This increased £25,000 every year, on 6th April, up to a maximum of £175,000 per person on 6th April 2020. With this date having passed couples now have the ability to utilise £1million pounds in Inheritance Tax (IHT) relief.

The maximum relief (if you can get it) is made up of 2 (general) Nil Rate Bands (2 x £325,000 = £650,000) plus 2 Residence Nil Rate Bands (2 x £175,000 = £350,000).

However, as with many things tax, the headline is much simpler than the practice.

Below are some important points to be aware of:

  1. To qualify for the Residence Nil Rate Band your home must pass to a direct descendent when you die.
  2. If when you die you do not own your home (perhaps you have gone into nursing care), then any previous home which you have lived in can count towards the relief even if it has been sold during your lifetime. This requires complex calculations and professional advice should always be sought.
  3. If you are a widow or widower and the Residence Nil Rate Band was not used on the first death then, like the (general) Nil Rate Band, any unused amount can be used on the second death.
  4. Unmarried partners of a deceased person and their children will not be eligible for the Residence Nil Rate Band. Careful planning is required in these circumstances to try and use as much of the relief as possible.
  5. If your assets are worth more than 2 million pounds then the availability of the Residence Nil Rate Band will be reduced or lost completely.

The Residence Nil Rate Band provisions are extremely complex. It is important you ensure that your Will is written in such a way that the availability of the Residence Nil Rate Band will not be lost. It is also important that when dealing with a deceased person’s estate that the relief is properly claimed, the Revenue will not tell you if you forget to claim it! Failing to do so could result in overpaid IHT of £140,000.00 (£350,000 x 40%).

It is important, therefore, that you seek proper advice both when reviewing your Will and when you are dealing with a loved one’s estate. Adam Scott, Consultant Solicitor at Humphries Kirk LLP is an expert in estate planning and IHT and can be contacted on 01202 421111 or

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