Page 30 - CPB March 21st

The Government has also introduced an additional nil-rate band (known as the “residential nil-rate band”) which applies when a ‘residence’ (or proceeds from the sale of a residence) is passed to a direct descendant. A direct descendant means a child of the customer (including a stepchild, adopted child or foster child) and other lineal descendants (grandchildren, etc.). The additional nil-rate band is £125,000 in the tax year 2018/2019, £150,000 in the tax year 2019/2020 and £175,000 in the tax year 2020/2021. After that it will then be increased in line with the Consumer Price Index (’CPI’). If a spouse or civil partner does not utilise his/her residential nil-rate band, any unused proportion can be transferred to the estate of the surviving spouse or civil partner. If the net value of the customer’s estate (after deducting any liabilities but before reliefs and exemptions) is above £2 million, the residential nil-rate band will be tapered away by £1 for every £2 that the net value exceeds that amount (rising in line with CPI from 2022 onwards).
Once the value of any chargeable PETs has been applied to the customer’s estate, and any available nil-rate bands have been taken into account,Inheritance Tax applies to the remainder of the customer’s estate at a rate of 40%. The personal representatives should obtain tax advice to identify any liability to Inheritance Tax and if there is such a liability, where there is sufficient
cash available within the estate to pay such tax. Even if there is no Inheritance Tax to pay, there are Inheritance Tax forms that the personal representatives are obliged to fill in for HMRC after a person’s death. These Inheritance Tax forms are complex, and the personal representatives should seek legal advice if they are unsure how to complete them.