For this tax year the new nil rate band on main residences (Residential Nil Rate Band or "RNRB") kicks in, rising to £1m of potential IHT relief by 2021.
This could be a disincentive to downsizing which many regard as much needed in order to increase liquidity in the residential property market and move elderly householders into homes more suited to their needs (relieving pressure on the Government's social care budget).
As with many recent HMRC reforms, there is further complexity and detail that requires understanding. The good news is that the nil rate can be available to downsizers. Having said that, careful advice will need to be taken in order to ensure the preservation of the new higher IHT thresholds. The big worry for the property industry is that the prospect of having to wrestle with the new HMRC downsizing provisions could dissuade many from trading in their homes.
The more that the property industry can do to help homeowners understand and navigate through the new regime the better.
Preserving your estate: understanding the new residential nil-rate band Monday, 25 July 2016 Inheritance tax is a concern for many; one of the most common questions asked in relation to estate planning is: 'how can I preserve more of my estate for my family?' In 2015 the government announced plans to reduce the inheritance tax burden on families in the UK through the creation of an additional nil-rate band for residential property. However, legislation surrounding the new scheme is complex and existing will arrangements can significantly impact the availability of the new allowance. In this article Katherine Willmott, solicitor in Foot Anstey's private wealth team gives a brief overview highlighting some key points to review in light of the new legislation