What the Transferable Nil Rate Band means for you

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Significant changes to the Inheritance Tax (“IHT”) regime came into effect in 2008 meaning that many people may now have Wills that are not only out of date but unnecessarily complex.  Where tax planning was considered before the introduction of the Transferable Nil Rate Band (“TNRB”) it was common for the first spouse to leave the tax free amount to non-spousal beneficiaries to take advantage of the individual IHT allowance on both deaths (known as a Nil Rate Band Trust).  However, the amendment to the Finance Act 2008 means you can now leave everything to your spouse and on the second death, you will be able to make use of not only your own nil rate band but also your spouse’s, effectively doubling the nil rate band allowance.  It is important to note that if you do not leave your entire estate to your spouse on the first death you will not qualify for the full 100% TNRB on the second death.  Other factors may also decrease the available transferable allowance, such as lifetime gifts.

More recently, with the introduction of the Residency Nil Rate Band (“RNRB”) the need for IHT planning in Wills has reduced significantly.  This means that come 2020/21 spouses can have a joint estate of up to £1m before having to pay IHT.

The importance of having your solicitor prepare your will for you has of course not decreased, particularly with the increasing scenario of second marriages/relationships. It has never been more important to ensure your assets are protected and will pass to the beneficiaries of your choice.

We at Jackamans recommend that you revisit your Wills at least every 5 years, or sooner if you have a change in family or financial circumstances.

If you would like to discuss your Will we are happy to provide you with a free half hour appointment to discuss your will.  We can also advise on Powers of Attorney and tax planning.

For further information please email zoe.southgate@jackamans.co.uk or call her on 01473 255591.

This article provides only a general summary and is not intended to be comprehensive.  Special legal advice should be taken in any individual situation.