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Don't be daunted by this section of your training! It is unlikely that you will be required to go into great detail with clients about these subjects but it is important to have a basic understanding of both IHT and the newly introduced Main Residence Nil Rate Band. 
Inheritance Tax 
 
Each individual currently has a ‘nil-rate tax allowance’ of £325,000 before Inheritance Tax becomes payable on their estate. Married couples effectively inherit their deceased’s allowance, bringing the surviving spouse’s allowance up to £650,000. Some brief information on minimising inheritance tax is provided in the initial client folder (given to the client at the initial appointment) but, as we explain in the covering letter, we are not qualified or insured to give detailed financial advice and if the client requires financial advice they should seek advice from an Independent Financial Advisor. 
 
Main residence nil rate band 
 
In addition to the above, a 'main residence nil rate band' is being phased in from 2017 to 2021. This additional nil rate band applies when a residence is passed on death to a direct descendant. This will be (per person) £100,000 in 2017/2018 (tax year), £125,000 in 2018/2019 (tax year), £150,000 in 2019/2020 and £175,000 in 2020/2021. In effect, this means that from 2020/2021 a married couple will be able to pass assets worth £1,000,000 (providing the main residence is worth more than £350,000) free of any inheritance tax. 
 
EXAMPLE CASE STUDY : Mr F dies in 2021. The family home is worth £500,000 and he and his wife have other jointly owned assets of £600,000 (total assets £1.1 million). Mr F's nil rate band of £325,000 and his main residence nil rate band of £175,000 are passed to his surviving spouse. 
 
Twelve months later Mrs F dies. The family home has increased in value to £550,000 and their other assets are valued at £600,000. The total of Mrs F's estate is £1,150,000. Mrs F has left all of her assets to her two children and, accordingly, the total nil rate band is £1,000,000 (£325,000 x 2 plus £175,000 x 2). 
 
If Mr and Mrs F had not had any children and Mrs F was leaving her estate to wider family members, only the basic nil rate band of £650,000 (£325,000 x 2) would apply as the new main residence nil rate band only applies where the property is left to direct descendants. 
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