What are the new rules for inheritance tax?
In recent years, the rules surrounding inheritance tax have undergone significant changes, impacting how individuals and families plan for the future. Understanding these new rules is crucial for anyone looking to manage their estate effectively and minimize tax liabilities. This article will explore the latest updates and provide insights into how they may affect you.
Changes to the Main Residence Allowance (MRSA)
One of the most significant changes to inheritance tax rules is the adjustment to the Main Residence Allowance (MRSA). This allowance provides relief on the value of a property left to direct descendants, such as children or grandchildren. The new rules have increased the MRSA from £100,000 to £175,000, which is set to rise to £175,000 in 2020 and £250,000 by 2023. This increase is intended to provide more support for families who wish to pass on their homes to the next generation.
Introduction of the Residence Nil Rate Band (RNRB)
Another important change is the introduction of the Residence Nil Rate Band (RNRB). This new band is available to individuals who leave their home to their children or grandchildren, or to a charity. The RNRB is set at £125,000 for deaths on or after 6 April 2017, with an additional £25,000 available for those who die on or after 6 April 2020. This means that married couples or civil partners can potentially benefit from a combined RNRB of up to £1 million, depending on their circumstances.
Time Limits for Claiming Inheritance Tax Relief
The new rules also include a time limit for claiming inheritance tax relief on gifts. Under the previous rules, individuals had up to seven years from the date of the gift to claim relief. However, the new rules now require individuals to claim relief within two years of the donor’s death. This change is aimed at ensuring that the tax system is fairer and more transparent.
Changes to Trusts and Life Insurance Policies
The government has also introduced new rules regarding trusts and life insurance policies. From 6 April 2017, life insurance policies written in trust are no longer exempt from inheritance tax. This means that the proceeds of the policy will be included in the estate for inheritance tax purposes. Additionally, the government has tightened the rules on trusts, making it more difficult for individuals to avoid inheritance tax by placing assets into trusts.
Conclusion
The new rules for inheritance tax have brought about significant changes that individuals and families need to be aware of. By understanding these changes, you can better plan your estate and minimize tax liabilities. It is advisable to consult with a tax professional to ensure that you are taking full advantage of the available reliefs and exemptions. As the tax landscape continues to evolve, staying informed is key to making informed decisions about your financial future.
