A reader asks: Hi, the personal IHT allowances of £325k, and £175k for passing on a property to direct descendants, are these 2 allowances ring fenced?
For example, if on death a property is valued at say £200k and personal assets at less than £300k could £25k of the surplus personal allowance be off-set against the potential IHT due on £25k (200-175)? Or, put another way, can the 2 allowances in total (£500k) be used for any asset that qualifies for IHT?
Regards
DPD
Expert response: Jordan Gillies, Partner at Saltus has provided the following answer:
There appears to be some confusion about the application of the standard £325,000 nil rate band (NRB). This is available to all individuals and can be used against any asset type on death. This includes a primary residence. The £175,000 residence nil-rate band is an additional relief available to those passing on a qualifying residence on death.
Therefore, in the example below, the £325,000 NRB will be fully utilised by £300,000 of the personal assets in the estate and £25,000 of the property value. The £175,000 residence nil rate band (RNRB) could then be applied to the remaining £175,000 of the property value. There would consequently be no IHT to pay. Unlike the standard NRB, the residence nil rate band only applies to an eligible property and cannot be used for any qualifying asset for IHT.
More information on how the allowances are applied and the impact of tapering on the RNRB can be found on Gov.uk
Nothing within this content is intended as, or can be relied upon, as financial advice. tax rules may change and the value of tax reliefs depends on your individual circumstances.
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