What Is the Residence Nil-Rate Band (RNRB)?

The Residence Nil-Rate Band (RNRB) is an additional inheritance tax allowance of £175,000 that applies when you leave your main home to direct descendants—your children or grandchildren.

It was introduced in April 2017 under the Finance Act 2016, phased in from £100,000 to reach £175,000 by 2020/21, where it remains frozen until April 2030.

This allowance sits on top of the standard £325,000 nil-rate band. Combined, you can pass on £500,000 tax-free. Married couples can combine their allowances for up to £1 million tax-free.

But here's the critical part: the RNRB is not automatic. You must have a valid will that leaves your home to direct descendants.

Sarah, 68, owns a £440,000 flat in Manchester. With the RNRB (£175,000) plus the standard nil-rate band (£325,000), her total tax-free allowance is £500,000. Since her estate is £440,000, she owes no inheritance tax at all.

David and Helen own a £900,000 house in Cambridge. Their combined allowances are (£325,000 + £175,000) × 2 = £1 million. They can pass their entire house to their children tax-free.

With average UK house prices having risen significantly since the financial crisis, more estates are being caught by the frozen £325,000 threshold. In 2025-26, inheritance tax is forecast to generate £9.1 billion—0.7% of total tax receipts.

The RNRB was designed to help families keep their homes. Without it, Sarah would have faced a £46,000 tax bill. With it, she pays nothing.

Who Qualifies for the RNRB?

To qualify for the RNRB, you must meet three conditions: own a qualifying residential interest, leave it to direct descendants, and have an estate under £2 million before the taper applies.

Condition 1: Qualifying Residential Interest

Your property must have been your main residence at some point during your ownership. It can be a house, flat, bungalow, houseboat, or mobile home—any dwelling where you lived.

Buy-to-let properties and investment properties do not qualify. Only one property can qualify for the RNRB. If you owned multiple homes throughout your life, you can nominate which one counts.

The property doesn't need to be your residence at death. If you moved to a care home, your former home can still qualify.

Both UK and overseas properties qualify, provided they were your main residence.

Condition 2: Direct Descendants

Direct descendants include your children (biological, adopted, step, and foster), grandchildren, great-grandchildren, and all further lineal descendants.

Direct descendants do not include nieces, nephews, siblings, friends, or unmarried partners. If you leave your property to your spouse first, who then leaves it to your children on the second death, the RNRB applies when the property eventually passes to the children.

Condition 3: Estate Value Under £2 Million

If your estate exceeds £2 million, the RNRB begins to taper. We'll cover this in detail in the next section.

Your estate value includes all your assets: property, savings, investments, and from April 2027, certain pension death benefits.

James, 73, lived in his £380,000 semi-detached house in Leeds for 40 years before moving to a care home in 2023. He leaves the house to his two sons. This qualifies—the house was his main residence, even though he no longer lives there.

Linda owns three buy-to-let flats in London worth £600,000 total, but she never lived in any of them. These do not qualify for the RNRB because they're investment properties, not her residence.

Raj owns a holiday home in Spain worth £200,000 where he lived for five years before returning to the UK. He leaves it to his daughter. This qualifies—overseas properties count if they were your main residence.

Beneficiary Type	RNRB Eligible?	Notes
Children (biological, adopted, step, foster)	✅ Yes	Core qualifying group
Grandchildren	✅ Yes	Lineal descendants qualify
Great-grandchildren	✅ Yes	All lineal descendants qualify
Nieces/Nephews	❌ No	Not direct descendants
Siblings	❌ No	Not direct descendants
Unmarried Partner	❌ No	Unless married/civil partners
Spouse (then to children)	✅ Yes	RNRB transfers to surviving spouse

How Much Is the RNRB in 2025?

In 2025, the RNRB is £175,000 per person. When combined with the standard nil-rate band of £325,000, you can pass on £500,000 tax-free as an individual or £1 million as a married couple.

The RNRB was phased in over four years:

2017/18: £100,000
2018/19: £125,000
2019/20: £150,000
2020/21 onwards: £175,000

Both the standard nil-rate band and the RNRB are frozen until April 5, 2030. This freeze means that as house prices and asset values rise, more estates will be caught by inheritance tax.

Amina, 69, has an estate worth £480,000—her house is valued at £360,000, and she has £120,000 in savings. She leaves everything to her daughter. Total allowance: £325,000 + £175,000 = £500,000. Inheritance tax owed: £0 (her estate is under the threshold).

Marcus, 74, has an estate worth £620,000—his house is worth £500,000, and he has £120,000 in savings. He leaves everything to his son. Total allowance: £500,000. Taxable estate: £620,000 - £500,000 = £120,000. Inheritance tax owed: £120,000 × 40% = £48,000.

Sophie and Tom have a combined estate of £950,000—their house is worth £650,000, and they have £300,000 in savings. When the first spouse dies, the estate passes to the surviving spouse (no inheritance tax due to spouse exemption). When the second spouse dies, their combined allowances are £1 million. Inheritance tax owed: £0 (their estate is under the threshold).

Your Total Tax-Free Allowances:

Standard nil-rate band: £325,000
RNRB: £175,000
Individual total: £500,000
Couple total (if unused and transferred): £1,000,000

The freeze until 2030 is significant. As house prices continue to rise, estates that are tax-free today may face substantial tax bills in five years. Planning now ensures you use the full allowance available.

The RNRB Taper: What Happens If Your Estate Exceeds £2 Million?

For estates valued over £2 million, the RNRB tapers (reduces) by £1 for every £2 your estate exceeds this threshold.

Complete loss of the RNRB occurs at £2.35 million for individuals or £2.7 million for couples who have transferred the unused RNRB from a deceased spouse.

The taper applies to your net estate value—that's after debts and liabilities but before inheritance tax. The standard £325,000 nil-rate band does not taper. Only the RNRB does.

Calculation formula: Tapered RNRB = £175,000 - [(Estate Value - £2,000,000) ÷ 2]

Estate valued at £2.2 million: RNRB = £175,000 - [(£2,200,000 - £2,000,000) ÷ 2] = £175,000 - £100,000 = £75,000 RNRB remaining.

Estate valued at £2.35 million: RNRB = £175,000 - [(£2,350,000 - £2,000,000) ÷ 2] = £175,000 - £175,000 = £0 RNRB (completely tapered).

Estate valued at £2.5 million: The RNRB is already £0 (fully tapered). Total allowance: £325,000 only. Taxable estate: £2,500,000 - £325,000 = £2,175,000. Inheritance tax owed: £2,175,000 × 40% = £870,000.

Estate Value	RNRB Available	Total Allowance (with £325k NRB)	Taxable Estate	IHT at 40%
£1.8 million	£175,000	£500,000	£1,300,000	£520,000
£2.0 million	£175,000	£500,000	£1,500,000	£600,000
£2.2 million	£75,000	£400,000	£1,800,000	£720,000
£2.35 million	£0	£325,000	£2,025,000	£810,000
£2.5 million	£0	£325,000	£2,175,000	£870,000

For high-value estates, the taper creates an effective 60% tax rate on the £2 million to £2.35 million band. You're losing both the RNRB (worth £70,000 in tax savings) and paying 40% inheritance tax on the excess.

If your estate is approaching £2 million, consider lifetime gifts, trusts, or pension planning to reduce your estate value below the taper threshold. You could save your family tens of thousands of pounds.

Downsizing and the RNRB: Can You Still Qualify?

Yes. If you sold your home, downsized to a smaller property, or moved to a care home after July 8, 2015, you can still protect your RNRB through the "downsizing addition."

The downsizing addition was introduced to prevent people from losing their RNRB if they needed to move to a smaller property or care facility. You must leave assets of equivalent value to direct descendants—such as cash, investments, or a smaller property.

The downsizing addition is capped at the RNRB amount (£175,000 maximum).

How the Downsizing Addition Works

Calculate the "lost RNRB" from your original home (the amount you would have had if you'd kept the property).
Calculate the RNRB from your new property (if any).
The downsizing addition equals the lost RNRB minus the new RNRB (capped at £175,000).
You must leave equivalent assets to direct descendants to claim this addition.

Patricia, 78, sold her £500,000 house in 2020 and bought a £250,000 bungalow. She leaves the bungalow plus £200,000 in cash to her son. The bungalow uses the full RNRB (£175,000 is the maximum, regardless of property value). Patricia doesn't need the downsizing addition because her new property qualifies for the full RNRB.

Robert, 82, sold his £420,000 home in 2018 and moved to a care home. He leaves £400,000 in cash and investments to his two daughters. He has no property at death. Lost RNRB: £175,000. New RNRB: £0 (no property). Downsizing addition: £175,000. He can claim this against the cash and investments left to his daughters. His full RNRB is protected.

Margaret sold her £300,000 house in 2012 and moved to a flat. She does not qualify for the downsizing addition because the sale occurred before July 8, 2015. She has lost her RNRB.

Scenario	Downsizing Addition?	RNRB Protected?
Sold home after July 8, 2015 + left cash to children	✅ Yes	✅ Yes
Downsized to smaller home + left smaller home to children	✅ Yes	✅ Yes (adjusted)
Moved to care home + left savings to children	✅ Yes	✅ Yes
Sold home before July 8, 2015	❌ No	❌ No
Sold home but left assets to spouse (not children)	⏸️ Not yet	⏸️ RNRB transfers to spouse for use on second death

If you downsized or moved to a care home after July 8, 2015, you can still protect your RNRB by leaving equivalent assets to your children. Your executor must complete form IHT436 to claim the downsizing addition.

Who Doesn't Qualify for the RNRB?

You do not qualify for the RNRB in the following situations:

1. You Don't Leave Property to Direct Descendants

If you leave your home to siblings, nieces, nephews, friends, or charity, the RNRB does not apply.

Alan, 70, never had children. He leaves his £450,000 house to his nephew. No RNRB applies—his nephew is not a direct descendant. Total allowance: £325,000 only. Inheritance tax: (£450,000 - £325,000) × 40% = £50,000.

2. You Never Owned a Qualifying Residential Interest

If you rented all your life, were a lifetime tenant, or only owned buy-to-let properties that you never lived in, you have no qualifying residential interest.

3. Your Estate Exceeds £2.35 Million (Individual) or £2.7 Million (Couple)

The taper completely eliminates the RNRB above these thresholds.

4. You Sold or Downsized Before July 8, 2015

The downsizing addition doesn't apply to sales before this date. The RNRB is lost.

5. Your Property Is Held in a Discretionary Trust

The RNRB doesn't apply unless the trustees appoint the property to direct descendants within two years of your death.

6. You Leave Your Home to a Life Interest Trust

Depending on the trust structure, the RNRB may not apply. Seek legal advice if you're considering trusts.

Susan leaves her £380,000 home to a cancer charity. No RNRB applies—charity is not a direct descendant. However, the charitable exemption means no inheritance tax is due at all.

Tom and Lisa lived together for 20 years but never married. Tom leaves his £500,000 house to Lisa. No RNRB applies, and there's no spouse exemption either. Lisa will owe inheritance tax on the estate above £325,000. If they had married, Lisa would have inherited tax-free, and Tom's unused RNRB would have transferred to her.

If you don't have direct descendants or want to leave your home to someone other than children or grandchildren, you won't benefit from the RNRB. Consider other inheritance tax planning strategies such as lifetime gifts, trusts, or life insurance.

Transferring the RNRB Between Spouses and Civil Partners

Any unused RNRB transfers automatically to your surviving spouse or civil partner. This is similar to how the standard nil-rate band transfers.

The transfer is claimed by your executor when the second spouse dies. The transferred RNRB is added to the surviving spouse's own RNRB, allowing up to 100% extra.

Married couples can pass up to £1 million tax-free: (£325,000 + £175,000) × 2.

The transfer applies even if the first spouse died before April 6, 2017, when the RNRB was introduced. As long as the first spouse didn't use their potential RNRB, it transfers.

Michael died in 2010, leaving his £250,000 estate to his wife Carol. In 2025, Carol dies, leaving her £900,000 estate (including the house) to their children. Michael's unused RNRB (100% of £175,000) transfers to Carol even though he died before the RNRB existed. Carol's allowances: (£325,000 + £175,000) × 2 = £1 million. Inheritance tax: £0 (estate is under threshold).

David died in 2020, leaving his entire £600,000 estate to his wife Helen (no inheritance tax due to spouse exemption). David didn't use his RNRB because he didn't leave property to children—it all went to Helen. When Helen dies in 2025, she can claim David's unused RNRB (£175,000) plus her own RNRB (£175,000) = £350,000 total RNRB. Combined with nil-rate bands: (£325,000 × 2) + (£175,000 × 2) = £1 million.

Even if your spouse died before 2017, you can still claim their unused RNRB when you die—provided you leave your home to your children.

Your executor must complete form IHT435 to transfer the RNRB.

How to Claim the RNRB: Forms and Process

The RNRB is not automatic. Your executor must claim it when filing the inheritance tax return.

Step-by-Step Process

Step 1: Determine if RNRB applies Check that the property was left to direct descendants and that the estate is under the taper threshold.

Step 2: Calculate the RNRB amount Use HMRC's RNRB calculator or complete form IHT435 manually.

Step 3: Gather evidence You'll need a will extract, property valuation, and proof of direct descendant status.

Step 4: Complete form IHT435 Submit this with the main inheritance tax return (IHT400).

Step 5: If downsizing, complete form IHT436 Provide details of the original property, sale date, and equivalent assets left to descendants.

Step 6: Submit to HMRC Send forms to HMRC Inheritance Tax within 12 months of death or before the payment deadline, whichever is sooner.

Forms You'll Need

IHT435: Claim for residence nil rate band
IHT436: Downsizing addition (if applicable)
IHT400: Main inheritance tax account

Download these forms from gov.uk/guidance/claim-the-residence-nil-rate-band.

The RNRB is not automatic. Make sure your will clearly states that your property goes to your children or grandchildren to avoid disputes and ensure your executor can claim the full allowance.

RNRB and Estate Planning: How to Maximize Your Allowance

Here are five strategies to maximize your RNRB and reduce your inheritance tax liability.

Strategy 1: Make a Will

The RNRB only applies if you have a valid will leaving your property to direct descendants. Dying intestate may result in your estate not passing correctly, preventing the RNRB from applying.

Strategy 2: Leave Property Directly to Children (Not via Trust)

Discretionary trusts can prevent the RNRB from applying. Life interest trusts may complicate your RNRB claim. If you're considering trusts, seek legal advice to preserve your RNRB.

Strategy 3: Consider Estate Value and Taper Threshold

If your estate is close to £2 million, consider making lifetime gifts to reduce its value. Gifts made more than seven years before death are removed from your estate under the potentially exempt transfer rules. Pension death benefits may also be excluded from your estate if nominated correctly, though this is changing from 2027.

Strategy 4: Protect Your RNRB When Downsizing

Keep records of property sales and purchases if you downsize. Ensure you leave equivalent value assets to your children if you sell your home. Inform your executor about completing form IHT436 for the downsizing addition.

Strategy 5: Married Couples—Plan for Both Deaths

The first spouse can leave property directly to children (using the RNRB immediately), or they can leave everything to the surviving spouse (RNRB transfers to them). The second option is often better for liquidity and flexibility, but discuss this with your executor or solicitor.

Oliver's estate is valued at £2.15 million. He makes lifetime gifts of £150,000 to his children, reducing his estate to £2 million. If he survives seven years, the gift is outside his estate. Result: Full RNRB (£175,000) instead of tapered RNRB (£75,000). Inheritance tax saved: (£175,000 - £75,000) × 40% = £40,000.

Priya, 58, owns a £460,000 house and has two children. She hasn't made a will. If she dies intestate, intestacy rules may not leave the property to her children in the most tax-efficient way. By making a will that leaves her house to her children, she guarantees the RNRB applies.

The RNRB can save your children up to £70,000 in inheritance tax (£175,000 × 40%). Don't lose this allowance by failing to make a will or by structuring your estate incorrectly.

Common RNRB Mistakes to Avoid

Mistake 1: Assuming the RNRB Is Automatic

Reality: You must have a valid will leaving property to direct descendants.

Fix: Make a will that explicitly leaves your home to your children or grandchildren.

Mistake 2: Leaving Property to Non-Direct Descendants

Reality: Nieces, nephews, siblings, and friends don't count as direct descendants.

Fix: If you want to leave property to non-descendants, accept you won't get the RNRB and plan accordingly with lifetime gifts or life insurance to cover inheritance tax.

Mistake 3: Forgetting About the £2 Million Taper

Reality: High-value estates lose the RNRB gradually above £2 million.

Fix: Consider lifetime gifts, trusts, or pension planning to reduce your estate value.

Mistake 4: Selling Property Before July 8, 2015

Reality: The downsizing addition doesn't apply to sales before this date.

Fix: If you sold before 2015, you can't recover the RNRB. Focus on other inheritance tax reliefs such as business relief, agricultural relief, or charitable gifts.

Mistake 5: Not Keeping Downsizing Records

Reality: Executors must prove you downsized after July 8, 2015, and left equivalent assets to children.

Fix: Keep property sale documents, purchase records, and will instructions clear.

Mistake 6: Placing Property in Discretionary Trust

Reality: The RNRB may not apply to discretionary trusts.

Fix: Use absolute gifts to children or bare trusts instead, or seek legal advice.

Grace, 67, initially planned to leave her home to her niece (no RNRB). After learning about the RNRB, she changed her will to leave the house to her daughter and left £50,000 in cash to her niece instead. Result: Full RNRB claimed.

Peter placed his £500,000 home in a discretionary trust for "flexibility." His executor couldn't claim the RNRB because the trust didn't meet the conditions. Inheritance tax cost: £70,000 (£175,000 × 40%) that could have been saved.

Simple mistakes can cost your family tens of thousands of pounds. Review your will regularly and ensure it's structured to claim the full RNRB.

Frequently Asked Questions

Q: What is the Residence Nil-Rate Band (RNRB)?

A: The Residence Nil-Rate Band (RNRB) is an additional inheritance tax allowance of up to £175,000 available when you leave your main residence to direct descendants such as children or grandchildren. It's added to the standard £325,000 nil-rate band, potentially allowing you to pass on £500,000 tax-free (or £1 million for married couples).

Q: Who counts as a 'direct descendant' for RNRB purposes?

A: Direct descendants include your children (biological, adopted, step, and foster), grandchildren, great-grandchildren, and further lineal descendants. It does NOT include nieces, nephews, siblings, or other relatives who aren't in your direct bloodline.

Q: What happens to the RNRB if my estate is worth over £2 million?

A: The RNRB tapers for estates valued over £2 million. You lose £1 of RNRB for every £2 your estate exceeds this threshold. For example, if your estate is worth £2.2 million, your RNRB reduces by £100,000 to £75,000. Estates over £2.35 million lose the RNRB entirely.

Q: Can I still claim the RNRB if I downsize to a smaller property?

A: Yes, you can claim the RNRB through "downsizing addition" if you sold or downsized your home after July 8, 2015, and left assets of equivalent value to direct descendants. This protects your RNRB even if you moved to a less valuable property or care home.

Q: Do buy-to-let properties qualify for the RNRB?

A: No, buy-to-let and investment properties do NOT qualify for the RNRB. The property must have been your main residence at some point during your ownership. Only one property can qualify, and you can nominate which one if you owned multiple homes.

Q: Can my spouse or civil partner inherit my unused RNRB?

A: Yes, any unused RNRB is fully transferable to your surviving spouse or civil partner. This means a married couple can effectively pass on up to £1 million (£325,000 + £175,000 × 2) to their children completely tax-free, provided their estate is under £2 million.

Q: How do I claim the RNRB for an estate?

A: You claim the RNRB by completing form IHT435 when filing the inheritance tax return (IHT400). Your executor must provide evidence that the residence was left to direct descendants and calculate the available RNRB amount, including any transferred from a deceased spouse.

Conclusion

Key takeaways:

The Residence Nil-Rate Band (RNRB) gives you an extra £175,000 tax-free allowance when you leave your home to your children or grandchildren—potentially £1 million for married couples.
You must have a valid will that leaves your property to direct descendants—the RNRB isn't automatic.
If your estate exceeds £2 million, the RNRB tapers (reducing by £1 for every £2 over the threshold), so consider lifetime gifts or trusts to stay under the limit.
Downsizing or moving to a care home doesn't mean you lose the RNRB—you can claim the "downsizing addition" if you sold after July 8, 2015, and left equivalent assets to your children.
Your executor must complete form IHT435 to claim the RNRB—make sure your will is clear and your family knows to claim this allowance.

Your home is likely your most valuable asset—and for most families, it's also the most emotionally significant. Ensuring your children inherit it tax-efficiently isn't just about saving money; it's about protecting the legacy you've built and giving your family security. The RNRB can save your children up to £70,000 in inheritance tax (£140,000 for couples)—but only if you plan ahead.

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What Happens If You Die Without a Will in the UK? - Learn about intestacy rules and why dying without a will can cost your family the RNRB.
How Much Does Inheritance Tax Cost in the UK? - Understand the full IHT picture, including nil-rate bands, exemptions, and how to reduce your tax bill.
How to Make a Will in the UK - Step-by-step guide to creating your will and ensuring it's legally valid.
Online Will vs Solicitor: Which Do You Need? - Compare the costs and benefits of making a will online versus using a solicitor.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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