The Residence Nil Rate Band (RNRB) is an additional inheritance tax (IHT) allowance in England and Wales. Launched in April 2017, it helps reduce the tax burden on family homes that pass to direct descendants, such as children or grandchildren.
How does RNRB work?
You get:
- Basic Nil Rate Band (NRB): £325,000 tax‑free allowance per person.
- Residence Nil Rate Band: Currently an extra £175,000 per person, for homes left to direct descendants.
If both allowances are available, a couple could pass £1 million tax‑free:
- £325k Nil Rate Band each → £650k
- £175k Residence Nil Rate Band each → £350k
- Total = £1 million
Who qualifies?
- The deceased must have died on or after 6 April 2017
- The property must be a main residence, owned at death (or downsized earlier), and must pass to direct descendants—children, grandchildren, or their spouses/partners (including adopted, fostered, step-children)
Key conditions and limits
Downsizing relief
- If someone sold or downsized after 8 July 2015, RNRB can still apply—so long as the proceeds pass to direct descendants.
Estate value cap (taper)
- Estates worth over £2 million face a reduction:
- RNRB is reduced by £1 for every £2 over £2m.
- Estates over £2.35m (RNRB ×2) get no RNRB
Transferring unused allowances
If RNRB isn’t used on the first death (e.g. home left to a spouse), the unused portion can transfer to the surviving spouse’s estate.
Example
First spouse dies in 2020 with a £2.1m estate and leaves home to spouse—no RNRB claimed due to taper. Unused RNRB is reduced proportionately and carried forward. When the second spouse dies, that reduced RNRB can apply, meaning the family still benefits.
Why it matters
- RNRB can save up to £70,000 in IHT per person (40% of £175,000)
- Couples who pass on their main home and the full allowance can potentially save £140,000 in tax.
- With tax thresholds frozen and property values rising, more families now use RNRB to reduce IHT bills
When to get professional advice
RNRB is straightforward in simple estates, but complexities often arise:
- Downsizing events or sale of the residence
- Estates valued above £2m
- Use of trusts
- Mixed inheritance scenarios (some direct descendants, some not)
At Dudden Law, we help you:
- Plan wills and trusts to make full use of RNRB,
- Navigate taper and downsizing rules,
- File HMRC paperwork accurately.
The Residence Nil Rate Band adds a valuable layer of tax relief for families leaving their home to children or grandchildren. Yet, its rules, especially regarding estate value, heirs, and timing, mean proper planning is essential.
If you’re unsure whether your estate qualifies, contact cgreenway@duddenlaw.co.uk