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Views sought on new Inheritance Tax Proposals
Earlier this year during the Summer Budget the Government announced it would phase in a new residence nil-rate band (RNRB) from 6 April 2017 when a residence is passed upon death to a direct descendant.
This has been designed to reduce the burden of Inheritance Tax (IHT) by making it easier to pass on the family home to direct descendants without a tax charge and has been seen as a response to the UK’s growing house prices.
When phased in the rates will be:
- £100,000 in 2017 to 2018
- £125,000 in 2018 to 2019
- £150,000 in 2019 to 2020
- £175,000 in 2020 to 2021
After this initial planned period, rates will then rise in line with the Consumer Price Index (CPI) from 2021 to 2022.
However, in a new technical note, HM Revenue & Customs (HMRC) has announced new proposals to take into account people who choose to downsize to a less valuable property later in life or who cease to own their own home, to ensure that they are not unfairly penalised by the policy.
In its note, HMRC said: “The government recognises that individuals may wish to downsize to a smaller and often less valuable property later in life. Others may have to sell their home for a variety of reasons, for example, because they need to go into residential care.
“This may mean that they would lose some, or all, of the benefit of the available RNRB. However, the government intends that the new RNRB should not be introduced in such a way as to disincentivise an individual from downsizing or selling their property.”
It goes on to say that where part or all of the RNRB might be lost because the deceased had downsized to a less valuable property, or had ceased to own a residence, the lost RNRB will still be available as long as a number of qualifying conditions are met. The qualifying conditions for this ‘additional RNRB’ can be found in the link to the technical note below.
If you would like to comment on this proposal, please email: firstname.lastname@example.org. The deadline for receiving responses is 16 October 2015.
Link: Technical note on Inheritance Tax