IHT: Main Residence Nil Rate Band At a glance

What is the Inheritance Tax (IHT) Main Residence Nil Rate Band? How does it work? Who can claim it? 

Subscribers see Main Residence Nil Rate Band (RNRB).

This is a freeview 'At a glance' guide to the Main Residence Nil Rate Band.

The Main Residence Nil Rate Band (RNRB) was introduced from 6 April 2017.

At a glance

What is the Main Residence Nil Rate Band?

The RNRB is designed to counter the fact that the nil rate band (currently £325,000 per individual) has not increased in line with property prices over the years.

• It is an additional band over and above the standard nil rate band, which applies to Qualifying Residential Interests (QRI) held at death or where downsizing relief applies, see below.
• A QRI is a dwelling house that has been the person’s residence at some point.
  • A dwelling house can include a variety of different less conventional types of homes if they have been used as your residence. See Main Residence Nil Rate Band (RNRB) for examples.
• It does not need to be your main residence and could be one that has only been used briefly.
• There is a strict order in which the different nil rate bands, including the RNRB, must be used on death. See Main Residence Nil Rate Band (RNRB) for details of how this works.
• It is only available on death; it does not apply to chargeable lifetime transfers e.g. a transfer to a trust.
• Only one property can qualify.
  • See Main Residence Nil Rate Band (RNRB) for how to deal with owning multiple properties which could be residences.
• It only applies when a property is left to direct descendants:
  • See Main Residence Nil Rate Band (RNRB) for who counts as a direct descendant.

How much is the RNRB and who can use it?

• The RNRB started at £100,000 in 2017 and increased by £25,000 per year to 2020-21 as follows.

• The RNRB has remained at £175,000 since 2020-21, and is frozen to 2027-28.
• A married couple (including civil partners) each has their own RNRB giving them as a couple up to £1m of ‘nil rate bands’ to use before IHT applies ((£325,000 + £175,000) x 2)
• The RNRB is 'tapered' at a rate of £1 for every £2 of excess if the overall net value of the death estate exceeds £2 million. See Main Residence Nil Rate Band (RNRB) for how to calculate the taper and how much of the RNRB you are entitled to if your estate exceeds £2m.

What is the Transferable RNRB?

Married couples and civil partners can transfer any unused RNRB in the same way as they can transfer the normal Nil Rate Band.

• A claim has to be made within two years of the second death.
• The house does not have to be the same one they lived in with their deceased spouse: it can be any home provided they lived in it at some stage and it is in their estate when they die.
• If the first spouse died before 6 April 2017 see Main Residence Nil Rate Band (RNRB) to determine what transferable RNRB is available.
• You can use the transferable RNRB of more than one spouse as long as the total received as transfers does not exceed one full RNRB.
• Tapering may apply; see Main Residence Nil Rate Band (RNRB) to check when it does.

What if my property is worth less than the RNRB?

The RNRB available cannot exceed the value of the property in the estate; see Main Residence Nil Rate Band (RNRB) for how to calculate the amount of RNRB available.

What if the property is left partly to direct descendants and partly to other family members?

The RNRB is restricted in cases where the property is only partly left to direct descendants.

See Main Residence Nil Rate Band (RNRB) for examples of how the rules work in these circumstances.

Who else can use the RNRB?

• Relief may still be available if your personal representatives sell the home as part of the estate administration depending on how they deal with the sales proceeds; see Main Residence Nil Rate Band (RNRB) for the conditions for relief here.
• The RNRB does not apply to any lifetime gifts you make, even if you don’t survive seven years.
• It can apply to a Gift with Reservation subject to certain conditions. See Main Residence Nil Rate Band (RNRB) for what these conditions are.
• The RNRB can only apply to residences left on trust in certain situations. See Main Residence Nil Rate Band (RNRB) for details.

What if I have downsized my house?

If you sold your home on or after 8 July 2015, but you leave assets of an equivalent value to your children or other direct descendants when you die you may still be able to benefit from the RNRB.

• The relief is given by calculating a ‘lost’ RNRB, or downsizing addition and adding it to the actual RNRB available on the death estate. See Main Residence Nil Rate Band (RNRB) for example calculations.
• It is capped at the maximum amount available for the year.
• The downsizing addition must be claimed.
• See Main Residence Nil Rate Band (RNRB) for what happens if you downsize more than once on or after 8 July 2015 and how to claim the downsizing addition.

 Planning points

• If your estate is not expected to significantly exceed £2 million you should consider making gifts before death to reduce your estate. 
• If your spouse dies first, your estate includes assets eligible for relief (such as Business Property Relief) and their value will take the total estate over £2 million, a transfer of the assets eligible for relief into a trust before your death may be effective to remove the RNRB restriction. See Main Residence Nil Rate Band (RNRB) for the specifics of this planning option.

Useful guides on this topic

Main Residence Nil Rate Band (RNRB)
What is the Main Residence Nil Rate Band? When was it introduced? How does it work? Who can claim it?

IHT: Transferable Nil-Rate Band
What is the Transferable Nil-Rate Band? Who does it apply to? How do I claim it?

Giving your home to your children
What are the tax implications of making a gift of your home to your children?

IHT: Estate planning checklist
This checklist covers some of the essential planning points that taxpayers should know when planning for their estate and Inheritance Tax (IHT).