Understanding Basic Inheritance Allowances
UNDERSTANDING BASIC INHERITANCE TAX ALLOWANCES
Inheritance Tax (IHT) is a complex part of estate planning. To understand IHT, it helps to grasp the basic allowances and reliefs, such as the Nil Rate Band (NRB), Transferable Nil Rate Band (TNRB), Residence Nil Rate Band (RNRB), and Transferable Residence Nil Rate Band (TRNRB). These different allowances are crucial in calculating the amount of IHT that may be payable on a person's death and can impact the inheritance left to your beneficiaries.
Nil Rate Band (NRB):
The Nil Rate Band, also known as the Inheritance Tax threshold, means the amount of a person's estate that can be passed on their death without incurring any Inheritance Tax. Currently, the NRB is set at £325,000.00. This means if your estate's value is below the NRB, there will be no Inheritance Tax payable.
Transferable Nil Rate Band (TNRB):
TNRB, allows married couples and registered civil partners to double their NRB when one of them passes away. If one spouse or partner dies and their estate does not use all or any of their NRB, the unused portion can be transferred to the surviving spouse or partner. This means that the surviving spouse or partner can benefit from a total NRB of up to £650,000.00.
Residential Nil Rate Band (RNRB):
The Residential Nil Rate Band, is an additional allowance for people leaving their main property to their children, grandchildren, etc (direct descendants). Currently, the RNRB is £175,000.00. This allowance is totally separate from the NRB and can be used in addition.
Transferable Residence Nil Rate Band (TRNRB):
Like TNRB, the Transferable Residence Nil Rate Band allows married couples and registered civil partners to combine their RNRBs. This means that, if one spouse or partner dies not having used their full RNRB, the unused portion of their allowance can be transferred to the surviving spouse or partner, therefore allowing a potential total RNRB of up to £350,000.00.
Additionally, there are various other factors and exemptions that can affect the final IHT bill. These can include charitable donations, exemptions for assets passed to a spouse or partner, and gifts. Proper estate planning by a Solicitor, including the use of Wills and trusts, can also help to reduce the amount of IHT on your estate.
Note: These allowances are subject to change due to legislative updates and changes. Understanding the basics of all IHT allowances is essential for estate planning. It is always advisable to consult with a legal expert to make the most of these allowances and provisions to ensure your estate planning is up to date with the latest regulations.
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