Legal News | 26.09.24
Time to say goodbye?
Last week we speculated on the potential candidates that will be used to fill the £22 billion ‘black hole’ in the country’s finances.
Rumours suggest that capital gains tax is in the firing line but chatter also surrounds possible changes to the inheritance tax system. If correct, one of the main reliefs that might be affected is the Residence Nil Rate Band (RNRB).
Our homes are often one of our most valuable assets, making the RNRB a very popular and valuable tax relief but only for those who qualify.
The RNRB is a tax-free allowance of up to £175,000 which can be applied against a deceased’s estate if the deceased passed their property, by Will or as part of an intestacy, to a direct descendant. A direct descendant includes children (including step-children and fostered and adopted children), grandchildren or other lineal descendant of the deceased. Direct descendants can also include the spouse or civil partner of a lineal descendant but does not include nieces, nephews or siblings. The fact that RNRB favours those who have lineal descendants over those who do not has seen it criticised by some since it was introduced.
The RNRB is available for estates worth less than £2 million but the relief is reduced by £1 for every £2 that the estate is worth over £2 million. Much like the standard nil rate band, any RNRB that is not used on the death of the first spouse can be transferred to the surviving spouse’s estate when they die, creating a combined relief of £350,000.
If the RNRB is abolished or reduced, it could mean that more estates will become taxable to IHT.
All will be revealed on 30 October 2024; if you would like to discuss your estate and inheritance tax planning, please get in touch with your usual contact at Wansbroughs or contact us at wealth@wansbroughs.com.
