The value of any part of a residence that is inherited by an exempt beneficiary will be taken into account.
Legislation will be introduced in Finance Bill 2018/19 to ensure that for deaths applying on or after 29 October 2018, the value of any part of a residence that is inherited by an exempt beneficiary is taken into account in determining a person’s lost relievable amount.
It is intended that Section 8J Inheritance Tax Act 1984 will be amended to ensure that where a residence forms part of a person’s estate immediately before their death as a gift with reservation of benefit, it will only be treated as being inherited by a direct descendant if the property became immediately comprised in the direct descendant’s estate as a result of the original gift.
The RNRB is an additional inheritance tax nil-rate band, conditional on a residence being passed on death to a direct descendant. This is currently £125,000, and will rise to £150,000 in 2019 to 2020, and £175,000 in 2020 to 2021. There is a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2m. This is at a withdrawal rate of £1 for every £2 over this threshold.
Any unused RNRB can be transferred to a surviving spouse or civil partner. It is also available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.