The Inheritance Tax nil-rate bands will remain at existing levels until April 2026. The nil-rate band (NRB) will continue at £325,000 and the residence nil-rate band (RNRB) will continue at £175,000.
There is a tapered withdrawal of the RNRB for estates with a value of more than £2m (before reliefs and exemptions) of £1 for every £2 of assets held over this threshold. Any unused NRB and RNRB can be transferred to a surviving spouse or civil partner. The RNRB is also available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
Inheritance tax brings out strong emotions, often being paid on income that has already been taxed during one’s lifetime, and often at sensitive times. The tax is sometimes labelled a “voluntary tax”, paid by those who have not planned their tax affairs adequately. However, there is the conflict between paying capital gains tax during lifetime or inheritance tax on death, or if timing has not worked as planned, a double whammy of both!
It is widely anticipated that the Chancellor will announce a range of significant reforms regarding inheritance tax in the near future, potentially as part of the additional papers due to be issued on 23 March 2021, so if you are thinking of succession planning and passing on assets you may only have a small window of opportunity available to you.
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