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The residence nil rate band & business relievable assets

03 August 2023

The residence nil rate band (RNRB) is an additional inheritance tax allowance that can be claimed alongside the usual nil rate band allowance. The RNRB allowance is currently a maximum of £175,000 and is transferable between spouses.

In order to claim the RNRB, certain criteria must be met, including the existence of a qualifying residential interest which is then inherited by a lineal descendant.

Another element of the RNRB allowance is that it begins to be tapered away where the value of the deceased’s estate exceeds £2 million. This is at a rate of £1 for every £2 an estate exceeds this figure.

However, in calculating the value of the deceased’s estate for the purpose of the RNRB, it is important to realise that this considers the value of assets that qualify for either business relief or agricultural property relief, even though by virtue of these reliefs, the assets do not attract inheritance tax. You may therefore end up in a situation where you are invested in assets that are not taxable for inheritance tax purposes, but result in your estate losing the RNRB.

Whilst this is not necessarily something to be concerned about – as you would still be deriving benefit from having the business or agricultural assets – it is something you should be aware of as too often it is assumed that – because these types of assets attract inheritance tax reliefs – they do not have any effect at all on the overall inheritance tax calculation.

If you would like more information about the RNRB or certain requirements, please do not hesitate to contact our highly rated wills, trusts & probate team.

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Our Legal 500-rated wills, trusts & probate team has the expertise to help you plan for the future and guide you through any difficult challenges that may arise, including those relating to business property relief.

Disclaimer: All legal information is correct at the time of publication but please be aware that laws may change over time. This article contains general legal information but should not be relied upon as legal advice. Please seek professional legal advice about your specific situation - contact us; we’d be delighted to help.
Jennifer Cockett LLB (Hons)
Associate, solicitor
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Jennifer Cockett
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