Inheritance tax – the main residence nil rate band


Death duties have been with us for centuries, in the guise of Estate Duty, Capital Transfer Tax and now Inheritance Tax (IHT). The combination of frozen thresholds and rising property prices have meant more estates than ever are likely to face an IHT bill. 

This briefing provides an overview of the Residence Nil Rate Band (RNRB). Supporting calculations are included to show the learning points in practice. 

Core considerations  

  • IHT is a tax on the transfer of assets on certain lifetime gifts or on death.  
  • In addition to the Nil Rate Band, there is also a Main Residence Nil Rate Band of £175,000 which is available to anyone who owns a main residence which is passed onto their direct descendants. 
  • The current rates of IHT on death are 0% up to the nil rate band and 40% on the excess, (reduced to 36% if 10% or more of the deceased’s net estate is left to charity).

  • UK domiciled individuals are liable to UK IHT on assets they own anywhere in the world. Non-UK domiciled individuals only pay UK IHT on assets that are situated in the UK. 

  • No IHT is payable on gifts between spouses/civil partners as long as both parties are domiciled in the UK. 


Main Residence Nil Rate Band (RNRB)

Most assets will be chargeable to IHT unless they are specifically exempt. An individual’s estate can include: 

  • Their home and any other properties they own. 
  • Any savings or investments (some types of pensions are excluded from the estate, but other investments including ISAs are taxable). 
  • Any other assets. 

An individual’s domicile status will determine whether they are subject to UK IHT or not. IHT applies to individuals who are domiciled in the UK, and it is assessable on their worldwide assets. For those domiciled abroad (non-UK domiciles), the tax usually applies only to assets situated in the UK. 

The RNRB is an important allowance that is available (broadly) where a home or former home is ‘closely inherited’ on death. For these purposes, ‘closely inherited’ means left to children, grandchildren or the spouses, widows or widowers of children or grandchildren either outright or to a trust where they are effectively treated for IHT purposes as owning the assets. 

The RNRB is an additional nil rate band amount available on top of the current IHT nil rate band and works in a similar manner by reducing the value of an estate that is subject to IHT at the full rate of 40%. It is applied before the nil rate band and any transferable nil rate band applicable when the death occurred. 

The RNRB is available where death occurs on or after 6 April 2017. It was phased in over four years. The maximum amounts available to an individual are shown below. 

Tax Year RNRB
2017/18 £100,000 
2018/19 £125,000 
2019/20 £150,000
2020/21 £175,000

In the Autumn Statement 2022, it was announced that the RNRB IHT will remain frozen at £175,000 until April 2028. 

The RNRB is available to anyone who: 

  • Held a qualifying residential interest at some time during their lifetime. They need to own or have part ownership of a property that was their residence at some point during the period of ownership. If an individual has more than one property, only one residential property can qualify. The personal representatives nominate which residential property should qualify if there is more than one in the estate - it cannot be divided across two properties. 

    The individual does not have to be living there at the time of their death – for example, if they have moved into residential care and the property has been let out, it will remain eligible for the RNRB as long as all other conditions are met.

    A property that has been a buy to let for investment purposes only and has never been lived in by the deceased cannot be used in claiming the RNRB. 
  • Passes the family home to direct descendants who include children, grandchildren and their spouses - however, foster, adopted and step-children may also be included.

    Siblings, nephews, and nieces of the deceased are not direct descendants. If a property is left wholly to one of these family members, then no RNRB is available. 
  • Had a family home, then downsized on or after 8 July 2015.The RNRB will, however, only potentially continue to be available in these circumstances if an individual disposes of an interest in the family home on or after 8 July 2015 and either: 
    • replaced it with a family home of lesser value or, 
    • do not replace it, but still hold assets of an equivalent value in their estate which are left to their children or direct lineal descendants.
    The aim of this concession is to prevent older couples feeling forced to remain in their family home purely to save IHT by virtue of the RNRB, and so that individuals who move into care are not penalised.

    The RNRB can be complex to apply, especially, for example, where the deceased downsized their home prior to their death – for example, they sold a residence and bought a less valuable property or sold a residence and went into residential care. HMRC have published guidance explaining how the RNRB works in respect of those who have downsized.

  • Has a net estate below £2m. Those with large estates may not see any benefit from the RNRB. When the £2M threshold is exceeded, the RNRB is reduced by £1 for every £2 of value by which an estate exceeds £2m. This is known as tapering, which can reduce the RNRB to zero. This means that there is no RNRB available if the deceased holds assets of more than £2.35m.

For example

Harold who has never been married dies in January 2024. His estate is valued at £2,350,000. Using tapering, (whereby for every £2 over the £2m threshold, the RNRB is reduced by £1) means that £350,000 is over the threshold and £175,000 tapering will reduce the RNRB to nil. 

Transferable RNRB

Like the transferable nil rate band (TNRB), the RNRB is transferable between spouses and civil partners on death. It does not apply to unmarried couples. This is irrespective of when the first death occurred or whether they owned residential property at their death. There will always be an additional 100% RNRB unless the first spouse's estate was greater than £2M. 

Transferring the RNRB works in a similar manner to the TNRB. It is the unused percentage of the RNRB from the estate of the first to die which can be claimed on the second death. This results in a doubling of the RNRB on the death of the surviving spouse or civil partner. An estate can qualify for a total RNRB as per the table below: 

Tax Year  RNRB
2017/18 £200,000 
2018/19 £250,000 
2019/20 £300,000 
2020/21 £350,000 

The allowance does not apply automatically – it must be claimed. A claim typically needs to be made by the legal personal representatives within two years ending from the end of the month in which second death occurs. 


Example Calculations

Example - IHT on death using the RNRB

Augustus dies in November 2023 with an estate valued at £590,000 which is left to his children.  

Net Estate £590,000 
RNRB (£175,000) 
Nil Rate Band (£325,000)
Chargeable to IHT £90,000 
Taxed at 40% £36,000

Note: that the RNRB applies to the entire estate on death. It is not an exemption or relief on the home itself, but instead reduces the total IHT charge on death. 

If the Net Estate had been £490,000 (and not £590,000), only £315,000 of the NRB would have been used and as £10,000 out of the £325,000 of the nil rate band remains unused, this could be transferred to Augustus’ spouse or civil partner.  

Example - Downsizing 

Henry is a divorcee who sold his home last year worth £350,000 and moved in with his new partner, he no longer owns a property. Henry dies in January 2024, having left his entire estate to his children from his first marriage. 

Because Henry sold his property after 8 July 2015 and left his estate to his children, his executors can utilise the full £175,000 RNRB against his assets before then utilising his standard nil rate band. 


Example - Transferable Main Residence Nil Rate Band and the Transferable Nil Rate Band 

Mo died in June 2017 leaving a wife, Barbara, and their adult son, Andrew. The family home was valued at £400,000 at that time and other assets, including investments and cash, totalled £1,000,000. Everything was held jointly between Mo and Barbara: 

The inter-spouse exemption applies meaning that ownership of the family home and other assets passes to Barbara without any IHT being due and Mo’s NRB and RNRB are unused. 

Subsequently, in December 2023, Barbara dies and leaves her estate to Andrew. At that time, the house has increased in value to £600,000 and the other assets are now worth £800,000, giving a total estate of £1.4 million. 

Barbara’s personal representatives have her standard nil rate band of £325,000 and, as she owns a qualifying residential interest on death, the RNRB is also available to use against her estate. 

As Mo left everything to Barbara, her personal representatives can claim his unused RNRB in addition to his unused standard nil rate band. Barbara’s estate can, therefore, benefit from a total of £1 million in nil rate bands: 

Two standard nil rate bands of £325,000 and two RNRBs of £175,000 (note that had the value of the house been less than £350,000 at the time of Barbara’s death, the total amount of RNRB available to Barbara would have been limited to the value of the house). 

After allowing for the available nil rate bands, the residual value of the estate is £400,000 and IHT of 40% means a tax liability of £160,000 on the amount being inherited by Andrew. 

This calculation is shown below: 

Estate on Barbara’s death  £1,4000,000
Barbara’s RNRB  (£175,000) 
Mo’s RNRB  (£175,000)
Barbara’s Nil Rate Band  (£325,000) 
Mo’s Nil Rate Band  (£325,000) 
Chargeable to IHT  £400,000 
Taxed at 40%  £160,000

The RNRB and Trusts

The RNRB will not be available in cases where the home is left to a discretionary trust. The following points should be noted in this respect: 

  • Where the home is left to minor children on attaining an age greater than 25, or to minor grandchildren (or other minor beneficiaries) subject to them attaining any specified age, for tax purposes, a discretionary trust is created and no RNRB will be available.
  • If the home (or a share of it) is left to a discretionary trust on first death of a married couple or civil partners, the gift will use some or all of the standard nil rate band of the first to die. The RNRB will not have been used so will be potentially available to offset against the estate of the surviving spouse on second death.
  • If the home is left to a discretionary trust on second death, the trustees have two years from the date of death to remedy the position by making an appointment out of the trust on terms that will ensure that it is deemed to have been closely inherited. 

There are alternative trust solutions that can provide control over when and how beneficiaries inherit while ensuring the RNRB remains available. One such option is a flexible power of appointment (interest in possession) trust.  

By leaving the home to such a trust, the testator can withhold the right to the capital proceeds of the house for as long as they choose (and provide the trustees with the flexibility to decide who will ultimately benefit from those capital proceeds and to what extent); however they will need to name ‘interest in possession’ beneficiaries who will be entitled either to occupy the property or to receive any income that is generated from the property (or, if it’s sold, from its reinvested proceeds) in the interim period. As the interest in possession beneficiaries will be treated as owning the trust fund for IHT purposes, they will be treated as having inherited the property for RNRB purposes. Consequently, as long as the interest in possession beneficiaries fall within the definition of ‘a closely inherited beneficiary’ the RNRB will be available to the estate. 

Where a married couple or civil partners have, between them, a joint estate that exceeds £2m, the RNRB will be restricted (by £1 for every £2 by which the threshold is exceeded) until it is eventually lost for joint estates in excess of £2.7m. In such cases, there may be merit in leaving an amount up to the value of the nil rate band (currently £325,000) to a discretionary will trust on first death. Two standard nil rate bands will still be used (one on first death, the other on second death, instead of both on second death). This means the amount left to the trust will not be aggregated with the estate of the surviving spouse and more chance of being eligible for RNRB on their subsequent death.   

Example - RNRB planning for married couples and civil partners

Amelia and Henry have a joint estate of £2.2m comprised of their home valued at £1.3m and various investments in a mix of joint and individual ownership. The RNRB amount potentially available to them is £350,000 however at the moment, Amelia and Henry have Wills leaving their entire estate to the survivor of them on first death which means that the RNRB available on second death will be reduced by £100,000 leaving £250,000 RNRB on current values. Of course, the estate is likely to grow in value between first and second death, meaning that the RNRB may be restricted further.  

If Amelia and Henry rewrite their Wills so that on first death, cash and investments to the value of £325,000 pass to a discretionary trust, a lower amount will pass to the survivor meaning that the estate on second death will be just £1,875,000 and the RNRB will be fully available. There will also be a bit of room for growth meaning that this simple measure could ultimately save them as much as £140,000 in IHT. In addition, the surviving spouse will be a possible beneficiary of the trust so will be able to access the funds if needed.