What is the inheritance tax nil rate band? | HK Wealth

What is the inheritance tax nil rate band?

The inheritance tax nil rate band, also known as the inheritance tax threshold, is currently £325,000, or £650,000 for a married couple.

There is also an additional ‘residence nil rate band (RNRB)’of £175,000 for an individual and £350,000 for a married couple which could potentially bring the total nil rate band up to £1m for a married couple.  (A taper reduces the amount of the RNRB by £1 for every £2 that the net value of the estate is more than £2 million).

If your estate is worth more than this amount, you will be liable to pay inheritance tax, with the part of the estate above the nil rate band being taxed at a rate of 40 per cent.What is the inheritance tax nil rate band?

Many people won’t have to worry about paying this charge, as their estates will be worth less than £325,000.

But with rising house prices, more and more of us are getting caught up in the inheritance tax net. In fact, official data shows that the average UK house price in August 2022 was £296,000, which is £36,000 higher than it was a year earlier.

So while you may have regarded inheritance tax as something that only the wealthiest people in society have to think about, it’s clear that this isn’t actually the case.

Thankfully, there are steps you can take to reduce your inheritance tax liability, so you can leave more of your hard-earned wealth to your loved ones when you die.

For example, you can gift up to £3,000 a year tax-free, as long as you don’t die within seven years of gifting an asset. Furthermore, assets left to a spouse or civil partner in your will are exempt from inheritance tax.

You may also qualify for the residence nil rate band before any inheritance tax is due, which depends on you passing your main residence to your children or grandchildren.  This is an additional £175,000 for an individual and £350,000 for a married couple which could potentially bring the total nil rate band up to £1m for a married couple. (subject to conditions).

Perhaps the first thing you should do is to speak to a professional, regulated financial adviser, who has experience and expertise in this field and will be able to talk you through the various options that are open to you.

They’ll also be ideally placed to dispel any common myths about inheritance tax that may have influenced your thinking. For instance, we’ve heard many clients say they thought that their pension would make up part of their estate when they die, or that ISAs don’t count towards inheritance tax.

It’s really important that you fully understand what counts and what doesn’t, so you can make the right decisions and maximise the amount you can leave behind.

Inheritance tax is a complex area of taxation, so it’s well worth consulting an expert before making any big decisions, so you can move forward with confidence and peace of mind.



https://www.litrg.org.uk/tax-guides/bereavement/what-reliefs-and-exemptions-are-there-inheritance-tax https://www.theprivateoffice.com/tax-planning/what-is-inheritance-tax-nil-rate-band#:~:text=What%20is%20the%20inheritance%20tax%20nil%20rate%20band%20for%202022,650%2C000%20for%20a%20married%20couple.



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Garry Hale
Garry Hale
MD & Certified Financial Planner

A brief meeting might be of interest, especially if you’re unsure just how wealth management and financial planning could help you.

It would only require the investment of an hour or so of your time, and the coffee’s not bad either.