Inheritance tax is a tax that is paid when a person passes away and leaves their estate to their beneficiaries. It can be a significant burden for those who are left behind, so it is important to understand how to avoid it. One way to do this is by taking advantage of the residence nil rate band (RNRB).The RNRB is a tax relief that was introduced in 2017 by the UK government. It allows individuals to pass on up to £175,000 of their estate to their beneficiaries without having to pay inheritance tax.
This amount increases each year, and in 2021 it stands at £175,000 per person. This means that if you are married or in a civil partnership, you can pass on up to £350,000 of your estate without having to pay inheritance tax. In order to take advantage of the RNRB, you must meet certain criteria. Firstly, you must have owned a home at some point during your lifetime. Secondly, the home must have been your main residence for at least two years before you passed away.
Finally, the home must be passed on to your beneficiaries after your death. If you meet these criteria, then you can take advantage of the RNRB and pass on up to £175,000 of your estate without having to pay inheritance tax. This can be a significant saving for your beneficiaries and can help them to keep more of the money that you have left them. It is important to note that the RNRB is not available for everyone. If you do not meet the criteria outlined above, then you will not be able to take advantage of this tax relief. Additionally, if your estate is worth more than £2 million then the RNRB will be reduced or withdrawn altogether. The RNRB is an important tool for those looking to avoid inheritance tax.
By taking advantage of this tax relief, you can ensure that your beneficiaries receive more of your estate after you have passed away. It is important to understand the criteria for eligibility and how it works in order to make sure that you are taking full advantage of this tax relief.
