What is the Nil Rate Band?

Nil Rate Band

The Nil Rate Band (NRB), also known as the Inheritance Tax (IHT) threshold, is the amount up to which an Estate has no IHT to pay.

The current allowance available on the Estate of an individual is £325,000; anything above this is taxed at 40%.

The NRB applies to property passing on death together with any taxable gifts made within the seven years before death.

Example

In 2017, Dora dies leaving an estate to her son and daughter worth £325,000.

Dora has never owned a residence, as she was a tenant farmer all her life and lived in rented accommodation. IHT is payable as follows:

£
Chargeable estate 325,000
Less: nil rate band (325,000)
Balance 0
Tax at 40% 0

This threshold is per individual and it is also possible to transfer the allowance between married couples and civil partners.

The NRB is fixed at £325,000 until 2021.

From 6 April 2017, a Residence Nil Rate Band (RNRB) has also been available in addition to the NRB. To find out more about the RNRB, check out our blog ‘How Does the Residence Nil Rate Band Affect Farmers?

At Green & Co we have developed an Inheritance Tax and Estate Planning review in order to advise clients and their family fully with regard to these issues. If you would like to speak to one of our team, please feel free to contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.