Residential Nil Rate Band
The Residential Nil Rate Band was introduced in April 2017.
Although intended to increase the amount someone is able to leave, before attracting Inheritance Tax, it does not apply to everyone and there are some very important qualifications, which must be met, if an estate is to benefit from this extra allowance.
The main criteria are that you must own a home and it must be passing to direct descendants. So, for example, a gift to a nephew would not qualify for this.
Further complications can arise where, for example, the deceased no longer owns a home, as it was sold to pay care fees, or where they downsized.
Particular care must be taken when drafting Wills, to ensure that the terms of the Will do not fall foul of the stringent requirements.
Assuming as estate qualifies, the extra amount depends on the Tax Year in which the death occurs. Currently, the thresholds are as follows:-
- £100,000 in 2017 to 2018
- £125,000 in 2018 to 2019
- £150,000 in 2019 to 2020
- £175,000 in 2020 to 2021
For later years, the threshold will go up in line with inflation based on the Consumer Prices Index.
The Residential Nil Rate Band is able to be transferred between spouses, similarly to the Transferrable Nil Rate Band.
Lasting Powers of Attorney
On 1 October 2007 Lasting Powers of Attorney replaced Enduring Powers of Attorney. A person given power or who has drawn up an Enduring Power of Attorney before 1 October 2007 can still use it and the attorney can still apply to have it registered in the usual fashion. This person has a duty to apply to register the Enduring Power of Attorney as soon as they believe that the donor is becoming or has become mentally incapable of managing their affairs.
The Lasting Power of Attorney is a legal document that lets you appoint someone you trust as an ‘attorney’ to make decisions on your behalf. It can be drawn up at any time while you have the mental capacity, but, unlike the Enduring Power of Attorney, cannot be used by your attorneys until it is registered with the Office of the Public Guardian.
A registered Lasting Power of Attorney can be used at any time, irrespective of whether you have the mental capacity to act for yourself or not.
There are two types of Lasting Powers of Attorney: 1. Property and Affairs Lasting Power of Attorney: This is similar to the previous Enduring Power of Attorney in that, as the name suggest, it covers your property and finances. 2. Personal Welfare Lasting Power of Attorney: This allows you to make decisions regarding the type of treatment you consent to when you do not have the mental capacity to do so and can include such things as life-sustaining treatment etc.
The Lasting Power of Attorney forms are substantially longer than the previous Enduring Power of Attorney forms but our staff will be happy to advise you of the key differences.
Stamp Duty Land Tax (SDLT)
Whilst not recent news, Stamp Duty was replaced by SDLT some years ago. The effect of SDLT however is wide ranging. As a tax on transactions, rather than documents, clients and solicitors must be aware that any transaction might be viewed in conjunction with another which could subsequently give rise to SDLT (for instance marriage might make a previous unconnected transaction, connected). Any transaction, however simple it may seem, always needs to be given serious thought. Leases and rent, particularly in commercial matters, are particularly at risk.
The rules regarding SDLT changed at the last mini-budget. It is now only possible to calculate this with refernce to the HMRC calculator. Please find the link below:
10% to charity on Death:
From 6 April 2012, if, by Will, you leave at least 10% of “your estate” to charity, the remainder of your chargeable estate is charged at 36%, rather than the usual 40%. This will only be of interest to you, if your estate exceeds the Nil rate Band (see below).
What consitutes “your estate” is somewhat more complicated to define, than the above statement may suggest. If you would like to make use of this scheme, we can discus the advantages/disadvantages of doing so, when preparing your Will.
Transferrable Nil Rate Band:
On 9 October 2007 the then Chancellor, Alistair Darling, as part of his Pre-Budget Report and Comprehensive Spending Review, introduced a number of changes to the rates and method in which various taxes are charged, the most important of which, we believe, is Inheritance Tax..
Before the Pre-Budget Report an individual was entitled to a £300,000 allowance (Nil Rate Band) on his or her death. This has since been increased to £325,000 in April 2009 and has remained this since. This meant that assets below the Nil Rate Band were taxed at 0% and everything exceeding £325,000 was taxed at 40%. Anything passing between spouses or civil partners on death was covered by spouse/civil partnership exemption and hence no Inheritance Tax was payable. What this generally meant was, where the first spouse died leaving everything to the other spouse and the surviving spouse later died, their estate would consist of the amalgamated assets but would still only be entitled to the £325,000 allowance.
Couples therefore needed to take advantage of the £325,000 allowance on the first person’s death so as to ensure that the surviving spouse’s estate was either kept below the threshold or alternatively was significantly reduced to reduce the amount of Inheritance Tax on their death. This generally involved the drafting of a Nil Rate Band Discretionary trust or an absolute gift of the half share of the property (having first transferred their property into Tenants in Common).
Following this change, the above planning is not so necessary as it introduced a method of “transferring” the Nil Rate Band from spouse to spouse or civil partner to civil partner. What this now means is if a spouse or civil partner dies leaving everything to their spouse/civil partner then on the surviving person’s death they are entitled to a £650,000 Nil Rate Band. However, this allowance is only for spouses and civil partners, not co-habitees. This allowance is only applied if the surviving spouse/civil partner dies after the 9 October 2007. It is, however, applied retrospectively so that if the first spouse/civil partner died before this date the new Nil Rate Band would apply.
This”new” regime will assist most couples to avoid Inheritance Tax and to ensure that their beneficiaries receive their maximum entitlement but this may not always be the case and our staff will gladly advise you of other methods to ensure your estate is tax efficient.
St Raphael’s Will Fortnight
For a number of years we have assisted St. Raphael’s Hospice, (a local and very worthwhile and under-funded charity), by doing a Wills fortnight.
During this fortnight, we prepare Wills for clients (old and new) for no fee, on the understanding that the fee will instead be donated to St Raphael’s Hospice.
This year, we are very pleased to announce that we have raised £3,120.00, beating our 2015 amount of £2,985.00 and our 2014 donations of £2,260! This year, in total, St Raphael’s raised £20,935! We are particularly proud of this achievement, given that there were 18 firms that took part and we managed to raise over 1/7th of the total raised!
Refund of Lasting Power of Attorney Fees
If you applied to register a power of attorney from 1 April 2013 to 31 March 2017, it is possible to claim back part of your application fee.
This applies to both Lasting Powers of Attorney and the former Enduring Powers of Attorney.
You can apply for the refund if you are the donor or an attorney.
The amount of the refund depends on when you paid the fees and interest will be paid on the amount due back to you.
Given the amount of potential refund, we would urge clients to apply for the refund direct, using the following link:
You must claim your refund by 31 January 2021.
Further information can be found at: