What is it?
An inheritance tax is a tax on the estate of someone who has died, including all property, possessions and money. There are three forms of Inheritance tax:
Nil Rate Band: This is the maximum tax free allowance, NRB is a fixed rate allowance until 2021
Transferable NRB: This is the amount of remaining estate of a deceased person that does not use up all of the NRB they are entitled to. In this instance, when a spouse dies and they leave everything to their surviving spouse that amount is exempt from the tax, the NRB is then transferred to the spouse to work out liability for their estate.
Residence NRB: The RNRB applies to individuals with direct descendants who have an estate (including a main residence) that exceeds the inheritance tax (IHT) threshold (or nil-rate band) of £325,000 for 2019/20.
How much is it?
The current threshold for inheritance tax is £325,000 per person rising to £650,000 for a married couple provided the first spouse to die leaves their entire estate to their spouse. This means that there is normally no tax to be paid if the Nil Rate Band(NRB) of your estate meets the current threshold, anything in your estate above the tax allowance is subject to a standard 40% tax bill.
Additionally there will be no inheritance tax imposed if you left everything above the threshold to an exempt beneficiary such as a charity. The NRB is a fixed rate and has been since 2010-211 tax year, however, it may change after 2021; but your NRB might be increased if you’re widowed or a surviving civil partner, unless a transferable nil rate band is transferred from the dead spouse to the surviving one.
The RNRB can be applied in addition to the NRB and TNRB. To qualify you must pass your home or a share of it to your children or grandchildren, including step-children, adopted children and foster children but not nieces, nephews or siblings. The RNRB is not a fixed and has risen incrementally over the years, therefore the combined allowance for inheritance tax has varied over the last three years. See table below.
|Tax Year||RNRB(£)||NRB (£)||Combined Allowances|
The RNRB will increase in line with the Consumer Price Index (CPI) from 2021/22 on wards.
Who pays it?
If a will has been written the executor of the will arranges to pay the inheritance tax otherwise the administrator of the estate pays it.
How can we help?
Stirling Ackroyd Legal has a diverse panel of solicitors with expert knowledge in dealing with wills and inheritance tax. If you require more information regarding your inheritance tax and how much your estate is valued at or finding out whether it is exempt from the inheritance tax or not, contact one of our experienced solicitors for a consultation.
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