HMRC has issued guidance on the inheritance tax (IHT)-free allowance for family homes bequeathed to direct descendants on or after 6 April 2017.
From 6 April 2017, the residence nil-rate band (RNRB) will provide an extra IHT-free allowance for family homes passed to direct descendants such as children, grandchildren, step-children, adopted or foster children and in some cases the spouse or civil partner of a direct descendant.
The maximum RNRB allowance for estates worth £2 million or less will rise yearly as follows:
- 2017 to 2018 – £100,000.
- 2018 to 2019 – £125,000.
- 2019 to 2020 – £150,000.
- 2020 to 2021 – £175,000.
These figures ‘top up’ the standard £325,000 threshold on all assets, above which an individual is taxed at 40 per cent. For estates worth more than £2 million the tax relief will be tapered away. Beyond the 2020/21 tax year, the maximum RNRB allowance will rise in line with inflation based on the consumer price index.
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