Every couple gets a £1m exemption. Correct? No – wrong. Some couples will, but most will not.
Every couple gets £1m exemption. Correct? No – wrong. Some couples will but most will not. This is the new residence nil rate band which was introduced in April 2017. The rules are complex but the basics are these:
Everyone has a standard nil rate band of £325,000. This usually transfers from one spouse to the other on death. So the survivor has two nil rate bands – a total of £650,000.
The residence nil rate band is an extra allowance on top which can give each spouse an extra £175,000 i.e. a total of £500,000 each. So a total of £1m as a couple. This is phased in until April 2020. So far so good.
But there are catches. First, you need to have a house which qualifies. So if you only have capital, no matter how much, you probably won’t qualify. Secondly, you need to leave your property or at least part of it to a qualifying beneficiary – usually your children. So if you have no children you normally don’t get the residence nil rate band.
Thirdly, the extra allowance is restricted to the value of the property. So couples only get £1m allowance if they leave property worth at least £350,000 to their children.
Fourthly, if your total estate is over £2m the allowance is reduced, and if your total Estate is over £2,700,000 you don’t get the extra allowance at all.
So it is a useful allowance whether you are single or a couple, but even when you qualify for it, great care has to be taken as to whether it should be used. It should certainly not be used simply because it is there.
This is where McClure is different. We don’t just look at avoiding your Inheritance Tax – which we can do. We don’t just look at ensuring that your assets finish up where you want them to – which we can also do. These are often competing requirements, but we can use our expertise in inheritance tax planning together with our expertise in Lifetime Trusts to give each client the best of both worlds. As far as we are aware no one else does this.
So whether you are a couple or on your own, why not contact us. Remember everyone’s circumstances are different and general advice is not much use. You need to have detailed advice from advisers you can trust.
So why not arrange a chat with one of our Consultants.
Home visits are available.
McClure Solicitors in association with McClure Wealth Management