The residence nil rate band is an extra inheritance tax allowance of up to £175,000 that applies when your home passes to your children or other direct descendants on death. It sits on top of the standard nil rate band of £325,000, so a single person whose estate qualifies can pass up to £500,000 free of inheritance tax, and a married couple or civil partners can shelter up to £1 million between them.1GOV.UK. Inheritance Tax Thresholds Both thresholds are frozen at their current levels until at least the end of the 2030–31 tax year.
How Much the Allowance Is Worth
The residence nil rate band (RNRB) is worth up to £175,000 per person. It was phased in from £100,000 in the 2017–18 tax year and reached its current level in 2020–21.2legislation.gov.uk. Finance (No. 2) Act 2015 Combined with the £325,000 standard nil rate band, an individual estate that meets the conditions pays no inheritance tax on the first £500,000.3GOV.UK. Inheritance Tax Thresholds and Interest Rates
For married couples and civil partners, any unused portion of both allowances can pass to the survivor’s estate, taking the combined tax-free threshold up to £1 million. Legislation in Finance Bill 2025–26 extends the freeze on the nil rate band, the RNRB, and the £2 million taper threshold through the end of the 2030–31 tax year, so none of these figures will rise with inflation before April 2031 at the earliest.1GOV.UK. Inheritance Tax Thresholds
Who Qualifies
Three conditions must all be satisfied. Miss any one and the allowance is lost entirely, so executors need to check each carefully.
A Qualifying Residential Interest
The deceased must have owned a residential property, or a share of one, that formed part of their estate at death. It must have been their home at some point during ownership, though they did not need to be living there when they died. Someone who moved into a care home still qualifies as long as the property remains in the estate.4GOV.UK. Check if an Estate Qualifies for the Inheritance Tax Residence Nil Rate Band The property must be a genuine dwelling, not a commercial building or a buy-to-let held purely for investment.
Direct Descendants
The home, or a share of it, must pass to a direct descendant of the deceased. That covers children, grandchildren, and great-grandchildren, along with stepchildren, adopted children, and foster children.5HM Revenue & Customs. Inheritance Tax: Main Residence Nil-Rate Band and the Existing Nil-Rate Band Under the Inheritance Tax Act 1984, the spouses and civil partners of those descendants also count, so a gift of the home to a son-in-law or daughter-in-law can still qualify.
Closely Inherited
The property must be “closely inherited,” meaning the descendant receives it outright or through a qualifying trust arrangement. A straight gift of the home in the will satisfies this, as does a share of the residuary estate that includes the property’s value. Trusts are more restrictive. Property held in a bereaved minor’s trust or an 18-to-25 trust can qualify, as can an immediate post-death interest. A standard discretionary trust generally fails the closely inherited test, because the beneficiaries do not have an absolute entitlement at the date of death.6GOV.UK. Inheritance Tax Manual – IHTM46033
The Taper for Estates Over £2 Million
Estates worth more than £2 million start losing the RNRB. For every £2 above that threshold, the allowance drops by £1. At £2.35 million the full £175,000 is gone.7HM Revenue & Customs. Inheritance Tax Manual – Calculating the RNRB: The Taper Threshold
The way the estate value is measured for this test catches people out. The figure is total assets minus liabilities, but you do not subtract exemptions (such as the spouse exemption) or reliefs (such as business property relief or agricultural property relief) before checking whether you exceed £2 million.8GOV.UK. Work Out and Apply the Residence Nil Rate Band for Inheritance Tax So an estate with £1.5 million in personal assets and £600,000 in business assets qualifying for full business property relief still breaches the threshold, even though the business assets attract 100% relief on the rest of the return. Lifetime gifts that became potentially exempt transfers are not included in this calculation, because the taper looks at the value of the estate at death rather than cumulative transfers.
Transferring Unused Allowance Between Spouses
When the first spouse or civil partner dies, any RNRB they did not use can transfer to the survivor. The transfer works as a percentage rather than a fixed amount. If the first spouse used none of their RNRB, 100% transfers. If they used 60%, the remaining 40% transfers. That percentage is then applied to the RNRB maximum in force at the date of the second death.9GOV.UK. Transferring Unused Residence Nil Rate Band for Inheritance Tax
The transfer still works even if the first spouse died before the RNRB existed (before 6 April 2017). HMRC treats their unused RNRB as 100%, because the allowance was not there to be used. That full percentage then applies to the RNRB maximum when the second spouse dies, so the survivor’s estate can claim up to £350,000 in total.9GOV.UK. Transferring Unused Residence Nil Rate Band for Inheritance Tax One exception applies: if the first spouse’s estate was worth more than £2 million, the taper would have notionally reduced their RNRB even though it did not yet exist, and the transferable percentage drops accordingly.
The transfer is not automatic. The executor of the second estate has to claim it on the inheritance tax return using Form IHT436.10GOV.UK. Claim Transferable Residence Nil Rate Band (IHT436)
Downsizing and Selling the Home
Someone who sold their home, gave it away, or moved to a smaller property does not automatically lose the RNRB. A “downsizing addition” can preserve some or all of the allowance for their estate, provided the assets that replaced the home (or the less valuable replacement home plus other assets) pass to direct descendants.11GOV.UK. How Downsizing, Selling or Gifting a Home Affects the Residence Nil Rate Band
The disposal has to have happened on or after 8 July 2015. Anything before that date cannot be counted.12HM Revenue & Customs. Inheritance Tax Manual – IHTM46051 If the deceased sold more than one home in the qualifying period, the executor can choose which disposal to use when working out the downsizing addition.11GOV.UK. How Downsizing, Selling or Gifting a Home Affects the Residence Nil Rate Band
The calculation can get complicated. It needs the value of the former property at the date of disposal, details of any replacement, and information about which assets pass to direct descendants. HMRC provides an online calculator for straightforward cases and will do the sums itself for more involved scenarios, such as where a transferable RNRB from a spouse is also in play.13GOV.UK. Claim for Residence Nil Rate Band (RNRB) – IHT435
How to Claim It
Claiming the RNRB means filing specific HMRC forms with the main inheritance tax return.
- IHT400 is the main inheritance tax account, filed for every estate that needs a full return.
- IHT435 is the supplementary form for the RNRB itself. It asks for the property’s full address, its value at the date of death, and details of the beneficiaries who inherit it.13GOV.UK. Claim for Residence Nil Rate Band (RNRB) – IHT435
- IHT436 transfers any unused RNRB from a deceased spouse or civil partner. File it alongside IHT435 when claiming a spousal transfer.10GOV.UK. Claim Transferable Residence Nil Rate Band (IHT436)
Before filing, executors need to establish the market value of the property at the exact date of death, verify the relationship between the deceased and each beneficiary receiving the home, and work out the total estate value to check whether the £2 million taper bites. Records of any lifetime gifts should also be kept, since chargeable lifetime transfers can affect the nil rate band calculation even though they do not feed into the RNRB taper. All forms are available on GOV.UK.