Category: Financial Services

Inheritance Tax: Residence Nil Rate Band (RNRB)

Posted on by r3df3rn

At Egan Roberts Chartered Accountants & Financial Advisors we offer estate planning services including the related tax advice. It is important we now think carefully about the residence nil rate band (RNRB) when estate planning. Please read on if you would like to find out more.

What is the RNRB?

The RNRB was introduced in Finance Act 2015 and applies to deaths after 5 April 2017.

The basic nil rate band currently stands at £325,000 as it has since 6 April 2009 and will not change until 5 April 2021.

Rather than increase the £325k nil rate band to adjust for the effects of inflation and increases in house prices, the RNRB was announced.

The RNRB provides an additional nil rate amount when a person’s main residence is passed to their direct descendant on death.

It is worth noting here that the RNRB is only available on death; it cannot apply to a lifetime gift.

How much is the RNRB?

The RNRB is in addition to the basic nil rate band (£325k) and will be gradually introduced as follows:

Tax Year      RNRB
2017/18    £100,000
2018/19    £125,000
2019/20    £150,000
2020/21    £175,000

After 6 April 2021 the RNRB will increase annually in line with the consumer price index.

When is the RNRB available?

The RNRB is available when a qualifying residential interest is closely inherited.

A qualifying residential interest is a residential property which at some point was occupied by the deceased as their residence.

It will be closely inherited if it is passed to any of the following:
• The deceased’s children or grandchildren and their spouses
• Widowers of those children/grandchildren if they have not remarried
• Step-children, adopted or foster children
• Children for whom the deceased acted as guardian whilst they were under 18 years old

Other information

In the same way as the basic nil rate band, if a person does not use their RNRB in full, any unused percentage can be transferred to the surviving spouse to be used in addition to their own RNRB.

The RNRB will be reduced by £1 for every £2 by which the deceased’s net estate exceeds a threshold of £2m. This threshold will also increase in line with the consumer price index.

As many people move into a smaller home or into residential care, the RNRB is still available on the estate if the person sold their home on or after 8 July 2015.

We hope you found the above information useful. If you would like to discuss estate planning or inheritance tax further, please contact Egan Roberts on 01254 583515.

Further guidance and information is available at https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

What happens to your business if you aren’t here? Shareholder Agreements.

Posted on by r3df3rn

No doubt you have spent many years building your business; you look after your precious customers and you work hard building a good reputation in your chosen field. But what happens if you aren’t around?

There may be 2 or 3 directors in your business.

  • What happens to their share of the business if they couldn’t work due to a critical illness or even died?
  • Is there sufficient money in the business account to buy out their share?

Most business owners either don’t know the answers to those questions, or do know but just keep hoping the worst won’t happen.

Don’t under-estimate the impact that any directors absence would cause.

Many people insure the premises they work from, insure their workers in case of accident and the stock they carry. But many don’t bother insuring the most important assets in the business….. The Directors.

The good news is that there are things you can do to safeguard your business should the worst happen.

You may have your will sorted out, but did you know you can have a will for your business? Its called a Shareholder Agreement, which sets out in black and white what happens to shares in the business if any of the shareholders die. It also ensures that there is sufficient provision for the business and remaining directors to be able to buy those shares from the deceased directors family and therefore provide a valuable lump sum to them.

It doesn’t cost the earth and the company should receive tax relief against Corporation Tax.

Still not sure what you need?

Contact Andy here at Egan Roberts for an initial chat, he has a number of years experience in advising businesses just like yours about the best way to protect the business. He is also able to chat over other financial planning matters that you may not have given much thought to. You can contact Andy on 01254 583515 or by email andy@egan.co.uk.