Inheritance Tax Planning and the Residential Nil Rate Band

Inheritance Tax Planning and the Residential Nil Rate Band

If you’re giving away your home to your children or grandchildren (including adopted, foster and step-children), you may qualify for the residence nil-rate band, meaning you’ll gain an additional threshold of £150,000 applied against the value of your property alone before IHT becomes due on your estate.

The RNRB will increase to £175,000 in 2020/21 and will then keep pace with the Consumer Price Index.

The family home doesn’t need to be owned at death in order to qualify for the RNRB. This is useful if you have downsized or sold your property to move into residential care, or a relative’s home prior to death, we can advise on your particular circumstances if this applies to you.. 

Like the general nil-rate band, any unused portion of the RNRB is transferable between spouses and civil partners. It’s the unused percentage of the RNRB from the estate on the first death which can be claimed on the second death.

If your partner died before 6 April 2017, their estate would have used none of the RNRB because it wasn’t available. The full RNRB will therefore be available for transfer unless the value of their estate exceeded £2 million and the RNRB is tapered away.

The RNRB is limited to one residential property. It will be down to the personal representatives to nominate which property should qualify if there’s more than one in the estate. Bear in mind that a property which was never a residence of the deceased, such as buy-to-lets, can’t be nominated. 

You could risk losing the RNRB if, for example, the property is placed into a discretionary trust for the benefit of children or grandchildren. However, some trusts for the benefit of children or grandchildren will not result in a loss of the allowance. We are able to offer bespoke advice as to which solution would benefit you and your family the most.


If you require any further information regarding Inheritance Tax or other estate planning please contact Angela Smith or Jill Latimer at our Oldham office for appointments across Greater Manchester.

Note: rates and thresholds are based on current UK legislation and are subject to change.

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