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Inheritance Tax

Ineffective estate planning could mean that the value of your estate is dramatically reduced due to Inheritance Tax (IHT). The result is HM Revenue & Customs may become the largest single beneficiary of your estate, rather than your intended beneficiaries.

The inheritance threshold, (nil-rate band), is £325,000 for the 2019/20 tax year. If you’re married or in a civil partnership any unused allowance can be claimed on second death by your personal representatives. Transfers between spouses, during their lifetime and on death are exempt.

In addition to the Inheritance Tax (IHT) nil rate band (£325,000) a residence nil rate band (RNRB) has been introduced from 6 April 2017. This is available when property with a qualifying residential interest is left to direct descendants.

Initially, the RNRB was set at £100,000 but increases by £25,000 each year until it reaches £175,000 in April 2020. Any unused RNRB on the first death of a married couple or civil partners has the potential to be transferable even if the first death occurred before 6 April 2017.

The Residence Nil-Rate Band is being be phased in as follows:

£150,000 for the tax year 2019/20

£175,000 for the tax year 2020/21

It is then expected to increase in line with Consumer Prices Index (CPI) from the 2021/22 tax year onwards. Any unused RNRB is claimed by the personal representatives on the second death.

The residence nil-rate band can also be claimed when a person ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the residence nil-rate band, are passed on death to direct descendants.

There is a tapered withdrawal of the residence nil-rate band where the value of assets owned by an individual at the date of death are more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The nil-rate band will remain at £325,000 until the end of 2020-21 tax year, when it is then expected to increase in line with CPI.

Some of the options available to you to help mitigate Inheritance Tax:

  • Ensure your Last Will and Testament* is structured in a way to ensure your estate is distributed tax efficiently.
  • Make use of lifetime gifts.
  • Utilise a variety of lifetime trusts to hold investments for your intended beneficiaries.

Through St. James’s Place we have access to a panel of leading law firms, which is designed to provide a wide range of differing legal services covering Inheritance Tax, matrimonial issues and general tax planning.

For further information, please contact us if you wish to discuss your personal situation.


The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected any may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

*Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills and Trusts are not regulated by the Financial Conduct Authority.


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