You can now leave more to your children and grandchildren
Posted on 15th April 2019 at 14:57
Who are my direct descendants?
The term includes quite a wide group of people:
• children, grandchildren or great-grandchildren and their spouses or civil partners
• adopted children
• foster children
• children who are under your guardianship.
What is the RNRB?
The standard nil-rate band is £325,000 per person. The RNRB is an additional amount you can leave, free of inheritance tax, if a property that has been your main residence goes to your direct descendants when you die.
What can I leave under RNRB?
The additional nil rate band has been available since April 2017, when the additional amount you could leave was £125,000. Initially this meant that up to £450,000 of an estate could be free of IHT. Where the RNRB was transferred in full to a surviving partner up to £900,000 could be left in total.
The RNRB has increased to £150,000 this year and will rise again, to £175,000 from 6 April 2020, so that couples who are married or in a civil partnership can leave up to £1million to direct descendants, free of IHT. Any amount above this will be taxed at 40%.
Since 8 July 2015 anyone who downsizes or no longer owns their home can still pass on assets equivalent the full value of the additional RNRB to their direct descendants when they die.
Limits to RNRB
The benefit of RNRB diminishes for estates of £2million or more, with a withdrawal rate of £1 for every £2 over the threshold. By the time the estate is worth £2.35 million, you will no longer benefit from the RNRB. However, any unused RNRB can be transferred to your surviving partner.
Make sure your Will is correctly written so you can take full advantage of the RNRB allowance to benefit your direct descendants.
Please get in touch.
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