The Residence Nil-Rate Band (RNRB) Explained

The residence nil-rate band is an additional inheritance tax (IHT) allowance introduced from 6 April 2017 and phased up to its full level. For deaths in the 2026/27 tax year it is worth up to GBP 175,000 per person. It is available on top of the ordinary nil-rate band of GBP 325,000, which every individual has and which can be set against any type of asset.

The RNRB is more restricted than the standard nil-rate band. It only comes into play where a person's estate includes a home they lived in at some point (a "qualifying residential interest") and that home, or a share of it, is left on death to their direct descendants. The amount of RNRB that can be used is capped at the value of the home passing to descendants: if your share of the property is worth GBP 120,000, your RNRB is limited to GBP 120,000, not the full GBP 175,000.

Both the GBP 325,000 nil-rate band and the GBP 175,000 residence nil-rate band are frozen. The freeze, first legislated in earlier Finance Acts and extended at the 2024 Autumn Budget to 5 April 2030, was extended by a further year at the 2025 Budget, so these thresholds and the GBP 2 million taper threshold are now maintained until 5 April 2031. Because the RNRB is not rising with house prices, more estates are expected to breach the GBP 2 million taper threshold over time.

For a married couple or civil partners, the practical headline is the GBP 1 million figure often quoted in the press. That comes from combining two nil-rate bands (2 x GBP 325,000 = GBP 650,000) with two residence nil-rate bands (2 x GBP 175,000 = GBP 350,000). It is only achievable where a qualifying home is left to direct descendants and the estate is below the taper threshold. It is a ceiling, not an automatic entitlement.

The RNRB is only available where the home is "closely inherited", meaning it passes to a direct descendant. HMRC defines direct descendants broadly, but the boundary matters: leave the property to the wrong relative and the allowance is lost entirely.

According to GOV.UK, direct descendants include:

• A child, grandchild or other lineal descendant
• A spouse or civil partner of a lineal descendant, including their widow, widower or surviving civil partner (provided they have not remarried)
• A step-child
• An adopted child
• A foster child
• A child where the deceased was appointed as their guardian or special guardian when the child was under 18

Crucially, HMRC states that direct descendants do not include nephews, nieces, siblings or other relatives. A gift of the home to a brother, sister or friend does not qualify, however close the relationship. This is one of the most common ways the allowance is accidentally forfeited.

There are also rules about how descendants inherit. In most cases the home needs to pass to them outright or through certain qualifying trusts, such as a bare trust, an immediate post-death interest, or a trust for a bereaved minor or an 18-to-25 trust. A gift of the home into a fully discretionary trust generally does not qualify for the RNRB, even where the beneficiaries include children, because no descendant has an absolute entitlement. If you have a will that leaves your estate into a discretionary trust, it is worth checking whether it protects or wastes the RNRB.

The residence nil-rate band is withdrawn from larger estates. For every GBP 2 that the net value of the estate exceeds the GBP 2 million taper threshold, the RNRB is reduced by GBP 1. This is a steep 50% withdrawal rate.

The "net value" used for the taper is defined specifically. It is the total of all the assets in the estate less any debts or liabilities. Importantly, you do not deduct exemptions or reliefs when working it out. So spouse exemption, charity exemption, business property relief and agricultural property relief are all ignored for the taper calculation. This catches out many business and farming families whose taxable estate looks modest after reliefs but whose gross assets sit well above GBP 2 million.

The effect is that the RNRB tapers away completely at higher estate values. For a single person with the full GBP 175,000 allowance, it is exhausted once the net estate reaches GBP 2,350,000 (GBP 2 million plus twice GBP 175,000). For a surviving spouse claiming a full GBP 350,000 of combined RNRB, it is gone by GBP 2,700,000. Estates between roughly GBP 2 million and GBP 2.7 million sit in a zone where each extra GBP 2 of assets can cost GBP 1 of allowance, which at the 40% IHT rate is an effective marginal cost worth planning around.

Because the taper looks at gross assets before reliefs, lifetime planning that reduces the size of the estate, such as gifting or restructuring, can sometimes restore RNRB that would otherwise be tapered away. That interacts with the wider rules covered in our reducing inheritance tax guide.

Like the ordinary nil-rate band, any unused residence nil-rate band can pass to a surviving spouse or civil partner. This is what allows a couple to reach up to GBP 350,000 of combined RNRB and, with two nil-rate bands, up to GBP 1 million in total allowances.

A key technical point is that it is the unused percentage that transfers, not a fixed cash amount. When the first spouse dies, HMRC records what proportion of their RNRB was unused. On the second death, that percentage is applied to the RNRB in force at that time. For example, if none of the first spouse's RNRB was used, 100% transfers, giving the survivor a second full band on top of their own. Where the whole estate passed to the surviving spouse (which is exempt), typically none of the first spouse's RNRB was used, so 100% is available to transfer.

The transfer is generous in two ways. First, it applies even if the first spouse died before 6 April 2017, when the RNRB did not yet exist. Their unused percentage is still treated as 100% in the usual case. Second, it applies even if the first spouse never owned a home. It is the surviving spouse who must leave a qualifying home to direct descendants for the combined allowance to be used.

The transfer is not automatic. The personal representatives of the second estate must claim the transferable RNRB, using form IHT436, alongside the claim for the survivor's own RNRB on form IHT435. The claim must normally be made within two years of the end of the month in which the second death occurs.

A common worry is that selling the family home, or moving to a smaller property, could waste the RNRB. The downsizing addition exists to prevent that. It allows an estate to claim RNRB that would otherwise be lost because the person moved to a less valuable home, or stopped owning a home altogether, before death.

To qualify for a downsizing addition, all three of these conditions must be met:

• The person sold, gave away or downsized to a less valuable home on or after 8 July 2015
• The former home would have qualified for the RNRB if they had kept it until they died
• The person's direct descendants inherit at least some of the estate

The calculation works out the "lost relievable amount": broadly, the RNRB the former, more valuable home would have attracted, compared with the RNRB available on the assets actually left to descendants. The downsizing addition is usually the lower of the RNRB lost through the move and the value of the other assets left to direct descendants. It also cannot exceed the maximum RNRB that would have been available had the downsizing never happened.

In practice this means someone who sells the family home to move into a care home or a smaller flat, and then leaves cash and investments to their children, can still benefit from the RNRB even though they no longer owned a qualifying home at death. As with the transferable band, the downsizing addition must be claimed by the personal representatives within two years of the end of the month of death, though HMRC has discretion to extend that period in some circumstances.

The RNRB is valuable but conditional, and there are several situations where it is reduced to nil or simply does not apply:

• No qualifying home. The estate must include a residential property the deceased lived in at some point. A pure cash-and-investments estate, with no home and no downsizing addition, gets no RNRB.
• The home goes to the wrong people. If the property passes to a sibling, a niece or nephew, a friend or anyone who is not a direct descendant, the RNRB is not available on it.
• A discretionary trust that is not for descendants. Leaving the home into a fully discretionary trust generally forfeits the RNRB because no descendant has an absolute entitlement, even if children are among the potential beneficiaries.
• The estate is too large. Once the net estate (before reliefs and exemptions) exceeds GBP 2 million, taper starts eroding the band, and it disappears completely at around GBP 2.35 million for one person or GBP 2.7 million for a couple.
• No claim is made. The RNRB is not given automatically. If the personal representatives do not claim it on the IHT return, it is not applied.

For unmarried couples, the transferable element is a particular trap. Because there is no spouse or civil partner, unused RNRB cannot pass between partners on death, so cohabiting couples cannot reach the GBP 1 million combined figure in the same way. This is one of several ways the IHT rules treat unmarried couples less favourably, which we cover in a dedicated guide.