Choosing to Gift the ‘Nil Rate Band’

When considering inheritance and its tax implications, the term nil rate band will be mentioned depending on the value of the estate.

Perhaps not a common term to those going through the inheritance process for the first time, but it is one that’s important to consider as it can affect the amount of money you ultimately have available to gift under your Will.

What is a nil rate band?

In essence, the nil rate band is the amount of an estate that can be passed on to beneficiaries free from inheritance tax (IHT) after death.

There are many options when considering the approach to this subject and is mostly dependent on your circumstances and the values involved in your estate.

The current nil rate band exemption is up to £325,000.

Does it affect me?

Inheritance tax can have a large impact on the value of your estate when passing it on to beneficiaries. Due to potential tax implications, your beneficiaries may not get as much as you’d expect them to so it is important to plan meticulously and ensure the maximum possible value is passed on to those whom you want to receive it.

What options can maximise the value of my estate?

There are a few more niche options that may be applicable to your estate. Although it is important to discuss your options with a legal professional who specialises in this sector of law, your options, depending on your circumstances, can include:

• Residence Nil Rate Band (RNRB) - This additional exemption has been phased in gradually and now amounts to £175,000(since 6 April 2021).
• Any available Transferable Nil Rate Band from a spouse or civil partner - On the death of a surviving spouse or civil partner it is possible to transfer their unused Inheritance Tax nil rate band, currently up to £325,000, to the survivor's estate.
• Any available Transferable Residence Nil Rate Band from a spouse or civil partner - On the death of a surviving spouse or civil partner, it is possible to transfer their unused residence IHT nil rate band, currently £175,000 (since 6 April 2021), to the survivor's estate.
• Any available additional NRB (arising from the death of a former spouse or civil partner) * - Following remarriage after the death of a former spouse or civil partner, it is possible to transfer their unused IHT nil rate band, currently up to an additional £325,000.
• Any available additional Residence NRB (arising from the death of a former spouse or civil partner) * - Like the circumstances mentioned in the previous bullet point, their unused residence IHT nil rate band, starting at £100,000, increasing to £175,000 by 6 April 2021 could be transferred.

Looking at your options? Get in touch with our dedicated Wills, Probate, and Trust team. Their specialist knowledge can guide your decision-making and provide a clear picture of options based on your unique circumstances.

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