Does Inheritance Tax apply on a person’s property?
Inheritance Tax (IHT) applies to a client’s estate. The assets which form part of an estate include any property or business. Whether an individual’s property is applicable to a client’s property depends on who they leave the property to when they pass away, as well as the overall value of their estate.
The Residence Nil-Rate Band (RNRB) is an extra property allowance that allows people to leave their homes to family, free from IHT. Under the rules, if your client is passing their home to a direct descendant, they can benefit from an additional £175,000 as of the 2023-24 tax year.
The RNRB allowance only applies if the client leaves their home to a direct descendant – either a child or grandchild. Nieces, nephews or friends, for example, do not qualify.
Not everyone will qualify for the full allowance. If the total estate is worth more than £2 million, the extra allowance tapers off – falling by £1 for each £2 above the threshold.