10th May 2022

Nil Rate Band Allowance – Part 3


However, there is a nasty surprise when it comes to ascertaining how far over the value ceiling you, as a couple, or as the survivor of a couple, may well be.

Let us say you have a property and investments and cash worth £1,999,999, and BPR assets worth say £350,001, whether those are:

BPR ISAs; or

other packaged BPR assets; or

whether it be a sole trading business, share of a partnership or shares in a private limited company where in all cases the business is ‘trading’ i.e., producing goods or providing services. 

The above may very well catch the professionally well-advised family or the one where the older generation has made its money and retains an interest in the family trading business.  You’d think that because the assets qualified for BPR status at 100% IHT tax relief rates, that the estate of the survivor when it comes to whether or not it attracts the Residential Nil Rate Band Allowance and any transferable Residential Nil Rate Band Allow is £1,999,999. It is not – for the sole purposes of ascertaining whether an estate is entitled to say RNRB or a TRNRB, it is the true, open market value of assets, not their IHT values.  So, in this case, the estate is ascertained at £2,350,000, and so no RNRB nor any TRNRB is allowed, and that family has the £650,000 worth of ordinary NRB values, albeit on a net estate for IHT purposes of £1,999,999.

Perhaps where this is most extreme is where the couple have a farm which attracts APR.  They may well have an estate which, other than the APR relieved value of the farm, may be quite modest in value.  But the value of farms, particularly here in the southeast, can be very significant indeed.

So, the survivor who is farming at the date of their death may have a farm worth say £2,000,000, and say  the non-APR value of the farmhouse, other property not used in agriculture and cash and investments say of £1,000,000.  They may think that, by reason of the NRB allowances and the estate value being within the double NRB and RNRB threshold that no tax is payable.  In fact, tax is payable on £350,000 being the value between a double pair of NRB and the sum of a double pair of NRBs and RNRBs, i.e., £140,000.

If you feel anything in this article concerns you and your family, then contact our Edward Walter on ewalter@bussmurton.co.uk and 01892 520320 to start a discussion as to what may or may not be appropriate for you in your circumstances.

Edward Walter

Edward Walter