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70% of people surveyed know nothing about the new residence nil rate band

30/03/2017

Five things people don’t understand about the new residence nil rate band

The new residence nil rate band (RNRB) is coming into force next week, research from Old Mutual Wealth* shows a staggering 70% still do not know anything about it. The basic principle of the RNRB is that a family home can be passed on to ‘direct’ descendants ‘free’ of inheritance tax. However, the rule is not that simple.

Rachael GriffinRachael Griffin, financial planning expert at Old Mutual Wealth, comments:

“With the new residence nil rate band coming into force next week, it is alarming that 70% still have no understanding of the new allowance. Even those who claim to have a good understanding of the residence nil rate band failed to correctly answer some questions on the detail of the new legislation. The lack of understanding around the new rules could result in people not structuring their will or their financial affairs in the most effective way.”

Rachael explains the five things that even those who claimed to have a good understanding of the RNRB didn’t know.  

   1. 45% did not realise you can select which property to have the allowance against

“The rule can apply to any one home included in the estate as long as it was lived in by the deceased at some stage before the death. The home doesn’t even have to be in the UK. However, it does have to be within the scope of IHT and it must be included in a person’s estate.”

   2. 45% did not realise the allowance will still apply even if the property is sold

“The government did not intend the RNRB to stop individuals from downsizing or selling their property. So they added a rule, which broadly speaking, means the value of the estate made from downsizing or disposal of the property is eligible for the allowance.”

   3. 40% did not realise any outstanding mortgage is deducted before applying the allowance

“The value of the home for RNRB purposes is the open market value of the property minus any liabilities secured on it such as a mortgage.”

   4. 36% did not realise property had to be left to direct descendants to benefit from the allowance

“To make use of the new allowance the recipient must be a child, grandchild or other lineal descendant or a spouse or civil partner of a lineal descendant. It’s important to note that direct descendants don’t include siblings, nieces and nephews or other relatives.”

   5. 29% did not realise the allowance increases

The RNRB will eventually allow up to £175,000 of property wealth, per person, to be passed on with no IHT liability. However, it is being phased in and in the ’17-18 tax year it will be £100,000.”

 

 

*Source: Old Mutual Wealth research conducted by Atomik Research. Survey took place March 2017. 1009 respondents living in the UK, aged 45 and over, with at least £50,000 in wealth.  

For more information contact

Kathleen GallagherOld Mutual Wealth023 8072 629307990 004932kathleen.gallagher@omwealth.com

Notes to Editors:

Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Old Mutual Wealth oversees £131.3 billion in customer investments (as at 30 September 2017).

It has an adviser and customer offering spanning: Financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

Old Mutual Global Investors (‘OMGI’) is the asset management business of Old Mutual Wealth with £39.8bn funds under management (as at 30 September 2017). On the 19th December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Following managed separation from Old Mutual plc, Old Mutual Wealth will rebrand to Quilter plc. Each of the businesses within the Quilter Plc group will be rebranded over a two-year period, with the exception of Quilter Cheviot, which will retain its existing name.

Old Mutual Wealth is part of Old Mutual plc, a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million (as at 31 December 2016) customers across the world and has a total of £212.3 billion of assets under management (as at 30 June 2017).

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