In the Summer 2015 budget the Government announced plans for a main residence nil rate band (RNRB) to be introduced from 6 April 2017. Currently, individuals have a nil rate band (NRB) of £325,000, which is the threshold up to which their estate and taxable gifts are exempt from inheritance tax.
Subject to qualifying conditions, individuals will have a main residence nil rate band in addition to the NRB when they pass a residence onto a direct descendant on death. As with the NRB, any unused RNRB can be transferred to a surviving spouse.
The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015, subject to certain qualifying conditions, and there will be a tapered withdrawal of the RNRB for estates with a net value of more than £2 million. There is further detail on the measure, but this summarises the key features.
The proposals however have come under attack from the chair of the House of Commons Treasury Select Committee, Mr Andrew Tyrie, who feels that they are so complex that individuals affected will be unable to understand them. He said that “traps lie everywhere in the detail” and “tax policy must be made more practicable and coherent”.
Indeed there have been many calls to scrap the RNRB and instead increase the NRB. Mr Osborne has however rejected this call from Andrew Tyrie, stating that the UK tax system is “no more complex than comparable systems”. So with any changes to proposals unlikely, individuals are encouraged to consider how they will be affected by the measure.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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