The Residence Nil Rate Band – The Residence Nil Rate Band Tax Factsheet

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The residence nil rate band was introduced in April 2017 as an additional allowance available to estates on death where there is a qualifying property that is ‘closely inherited’. This factsheet looks at how the relief works and key points to consider.

Key Facts:

  • The residence nil rate band (RNRB) is available to an individual on death, in addition to the standard nil rate band if they leave their main residence to a direct descendant.
  • The RNRB was £100,000 in 2017-18, rising by £25,000 each year until 2020/21.
  • The relief is tapered for estates larger than £2m.
  • Unused RNRB can be transferred to surviving spouses or civil partners. There are also provisions where an individual downsizes.

What is the Residence Nil Rate Band (RNRB)?

The residence nil rate band was introduced in 2017-18 and is an additional allowance to the standard nil rate band of £325,000.

The relief is available to those individuals who, on death, leave their main residence to a direct descendent under the terms of their Will or under the intestacy provisions.

The RNRB was initially introduced at £100,000 and is set to increase as follows:

Tax Factsheet - The Residence Nil Rate Band

The value of the RNRB will be offset against the value of the property before the standard nil rate band.

As is the case with the standard nil rate band, unused amounts can be transferred over to the surviving spouse (civil partner). This applies even if the first spouse or civil partner died before the RNRB was introduced.

There is also no requirement for the first spouse that dies to own a qualifying residential interest at the time of their death for the transfer to be available to the survivor. A claim must be made to transfer any unused RNRB,

How does the RNRB work?

The RNRB is limited to the lower of the value of the property left by the deceased or the total RNRB available.

The RNRB is applied to the estate in priority to the standard nil rate band. If the property value is less than the RNRB, the balance can’t be utilised against the remainder of the estate.


Alan dies in November 2017 leaving his wife, Beth and their two children. The family home is worth £500,000 and other assets total £700,000.

On Alan’s death, all assets pass to his wife and the spousal exemption applies such that no IHT is due.

When Beth dies in May 2019, she leaves her entire estate to her two children. At the time of her death, the market value of the house is £600,000. Beth’s executors have her NRB and SNRB. They can also utilise Alan’s unused NRB and SNRB providing a total of £950,000.

It should be noted that if the value of the house had been less than £300,000 at the time of Beth’s death, the total RNRB available would have been limited to the market value of the house.

After allowing for NRBs, the taxable estate is £350,000 with IHT @ 40% resulting in a £140k liability.

Qualifying Property

For property to qualify, it must have been the deceased residence at some point in their life and it must form part of their estate.

Where an individual owns more than one residential property, their personal representatives can elect which property qualifies for RNRB. Buy-to-lets will not qualify for RNRB unless they were lived in by the deceased for a time.

The value of the property is the net value after deducting any mortgages or other debts charged on the property.

Qualifying Direct Descendants

To make use of the RNRB, an individual must leave their property to a direct descendant.

A direct descendant is:

  • A child, grandchild or other lineal descendant
  • A spouse or civil partner of a lineal descendant (including widow, widower or surviving civil partner)
  • An individual who was at any time a person’s stepchild or foster child
  • An adopted child of the deceased,

The £2m Threshold

If the deceased leaves an estate worth more than £2m, the availability of the RNRB is tapered. For every £2 that your estate is valued over £2m, the RNRB is reduced by £1.

In the 2018-19 tax year, if an individuals estate is worth more than £2.25m, the RNRB is reduced to nil.


For most Trusts, if a qualifying beneficiary (i.e. a direct descendant) is the principal beneficiary then the RNRB can be applied when the property passes into Trust.

The RNRB is not available to pure discretionary Trusts as there are no qualifying beneficiaries inheriting outright.

Potential Issues

The RNRB has the potential to be a valuable relief but there are a number of details that need to be considered to avoid losing the allowance such as the terms of individual’s Will, gifts with age contingencies and tapering provisions.

If you are concerned about the availability of the RNRB to you, we would be more than happy to review your position to ensure your future IHT relief is maximised.

Downsizing Relief

Individuals can downsize and still benefit from the RNRB. The relief is designed to apply to those people who downsize their home as they get older or move into residential care.

The qualifying conditions for relief as are follows:

  • The property must have been owned by the individual and would have qualified for RNRB if the individual had retained it.
  • A lower value property, or other assets if the property has been disposed of, are in the deceased’s estate
  • The lower value property or other assets are inherited by direct descendants on the individual’s death
  • The downsizing must occur on or after 8 July 2015

A claim has to be for the downsizing RNRB in the same way one is made to transfer unused RNRB. If the deceased disposed of more than one home between 8 July 2015 and their date of death, the executors can choose which disposal is taken into account to calculate the downsizing addition.

This factsheet is based on law and HMRC practice at July 2018.

For more information contact Richard Major on 0113 396 0115 or 07782 274 754 or email [email protected].