The residence nil rate band (RNRB) is seen by some as the answer to David Cameron’s promise of a £1m nil rate band.

Every individual currently enjoys an allowance of £325,000 to offset against the inheritance tax due on their estate.  The RNRB is being introduced in April 2017 at a starting threshold of £100,000 per individual.  This will increase annually by £25,000 until 2020/21 when it will reach £175,000, giving an individual a potential allowance of £500,000 and a couple, £1m.  After 2020/21, the RNRB will increase in line with inflation.

The RNRB will be available in full provided an estate is worth less than £2m.  For estates in excess of this value the allowance will be tapered. 

To claim the allowance, you must own an interest in a property, which you have lived in, which must be left to your lineal descendants.  This includes not only your children or grandchildren, but their spouses or civil partners.  Step-children also fall into this category.  The Revenue has also made provision for occasions where a property may have been sold shortly before death or if downsizing has occurred.

It is advisable to have a solicitor look over your existing will, to ensure it does not inadvertently prevent your estate benefiting from the RNRB.  We have seen many wills, even with very basic provisions, fall foul of these new, over- complicated rules.

Whilst we will have to see in practice how effective the RNRB will be, some are already saying that it does not go far enough, that it is unnecessarily complicated and that an overall increase in the general nil rate band would have been better received.  Only time will tell!