Residence nil band for inheritance tax purposes

If an estate is valued at more than £2,000,000 the additional residence nil band which comes in for deaths after 5 April 2017 is reduced by £1 for every £2 over.

So potentially savings of up to £350,000 x 40% = £140,000 could be lost once the estate’s value has surpassed the maximum even if there is a transferable residence nil band.

However, failed PETs do not count towards the estate’s value; so making lifetime gifts to bring an estate below or closer to £2,000,000 could result in a significant saving of inheritance tax – even if done as part of some death bed planning.