How Does the Residence Nil Rate Band Affect Farmers?

Residence Nil Rate Band

The introduction of the Residence Nil Rate Band (RNRB) may have a substantial impact on Inheritance Tax (IHT) Planning and how farmers pass on their assets, possibly tax-free.

The new allowance was introduced back in April 2017 at an initial threshold of £100,000, which will rise to £175,000 by April 2020. This threshold is per individual and it is also possible to transfer the allowance between married couples and civil partners.

The RNRB is in addition to the existing Nil Rate Band of £325,000 which is the current allowance available on the estate of each individual, the main difference being that the RNRB is tied in to residential property.

The RNRB allows complete relief from IHT up to the threshold on a house lived in by the deceased at any time, provided that the house is given to a direct descendant such as a child, grandchild, etc. or a spouse, and where the net value of the estate at the date of death is £2m or lower.

With timely Inheritance Tax Planning, this new band could offer more flexible relief for those wishing to take a step back from active farming and where other avenues of tax relief, such as Agricultural Property Relief and Business Property Relief, have more restrictions or may not apply.

For more information please contact our tax experts.

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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