The new Inheritance Tax main residence nil-rate band (RNRB) came into effect on 6 April 2017. The RNRB is a new transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death. The RNRB is on top of the existing £325,000 Inheritance Tax nil-rate band (NRB) threshold.
The RNRB is £100,000 in 2017-18, increasing to £125,000 in 2018-19, £150,000 in 2019-20 and £175,000 in 2020-21. Any unused portion of the RNRB can be transferred to a surviving spouse or partner in a similar way to the existing NRB. The forms to claim the RNRB and transfer any unused RNRB have been updated.
The allowance is available to the deceased person’s children or grandchildren. By 2020-21, parents will be able to pass on property worth up to £1 million free of Inheritance Tax to their direct descendants. However, there will be a tapered withdrawal of the RNRB for estates with a net value of more than £2m. This will be at a withdrawal rate of £1 for every £2 over this threshold. HMRC has also developed a new online RNRB calculator to work out how much additional threshold an estate may be entitled to.