Residence nil rate band: how it works and what it could save you
This guide explains who qualifies for the residence nil rate band, how the £2 million taper works, how the allowance transfers between spouses, and how executors claim it.
What is the residence nil rate band?
The residence nil rate band (RNRB) is an additional inheritance tax allowance of up to £175,000 per person that applies when a home the deceased owned and lived in passes to direct descendants. You will see it abbreviated to RNRB, and sometimes written as the residential NRB. It was introduced on 6 April 2017 and sits on top of the standard nil rate band of £325,000, which applies to every estate regardless of what it contains.
Nil rate band (per person): £325,000
Residence nil rate band (per person): up to £175,000
Maximum for an individual: £500,000
Maximum for a married couple or civil partners: £1,000,000
Taper starts (net estate value): £2,000,000
RNRB fully lost (net estate value): £2,350,000
As of August 2026, both the nil rate band and the residence nil rate band are frozen until 5 April 2031, a freeze confirmed by the 2025 Autumn Budget. As property values rise and the thresholds stay still, more estates are pulled into inheritance tax each year. For how the allowances fit into the wider tax picture, see our guide to the inheritance tax threshold.
What counts as a qualifying residence?
A property qualifies for the residence nil rate band if the deceased owned it and lived in it at some point during their ownership. The property does not have to be the main residence, and there is no minimum period of occupation. A former main home that had become a second home by the time of death still qualifies, provided the deceased lived in it at some stage while they owned it.
A property that was only ever a rental investment, never lived in by the deceased, does not qualify. A lifelong renter has no qualifying residence and cannot claim the relief.
Only one residence can claim the relief. If the deceased owned more than one qualifying property at death, the executors choose which one the residence nil rate band applies to. Someone who moved into a care home before death can still claim the residence nil rate band on their former home, provided they owned and lived in it at some point.
Which direct descendants qualify for the residence nil rate band?
The residence nil rate band applies only when the home passes to a direct descendant, and HMRC's definition is specific. Direct descendants are:
Children, including stepchildren, adopted children and foster children
Grandchildren and further lineal descendants
The spouse or civil partner of any direct descendant, provided they had not remarried at the time of the deceased's death
Siblings, nephews, nieces, friends and unmarried partners are not direct descendants. A will that leaves the home to any of them loses the relief.
The widow or widower of a child is included, as long as they have not remarried. This covers the common case of a daughter-in-law inheriting when the son has predeceased the parent.
The property must be "closely inherited". In practice, that means the home passes to the descendant directly, through the will or under the intestacy rules, or via a qualifying trust such as a bereaved minor's trust or an immediate post-death interest trust. Some trust structures, notably discretionary trusts where direct descendants are only one class of potential beneficiary, can cause the residence nil rate band to fail. A solicitor should check the will structure where a trust is involved.
How does the £2 million taper work?
The residence nil rate band is reduced by £1 for every £2 that the net estate exceeds £2 million. At a net estate value of £2.35 million, the full £175,000 allowance is tapered away to nothing.
The taper applies to the net estate value, meaning the gross estate minus liabilities but before reliefs. It catches out more families than people expect, particularly in London and the South East, where a modest home plus pension plus investments can pass £2 million without the family feeling wealthy. An accurate valuation of the whole estate matters here, not just the home, and our guide on how to value an estate for probate explains how.
The taper is assessed on each death separately. A couple with a joint estate of £2 million during their lifetime does not automatically lose the relief. What matters is the value of each estate at the point it passes. The £2 million taper threshold is itself frozen until April 2031, so more estates will be tapered over time as asset values rise.
How does the transferable residence nil rate band work?
When a spouse or civil partner dies first and does not use their residence nil rate band, the unused proportion transfers to the survivor's estate. This is how a married couple reaches the £1 million combined allowance: two nil rate bands of £325,000 plus two residence nil rate bands of £175,000.
The transfer works even where the first death happened before 6 April 2017, when the residence nil rate band was introduced. In those earlier cases the deemed unused RNRB is £100,000, the level at introduction, but it is the percentage unused that transfers. In practice, most surviving spouses widowed before 2017 can still claim the full additional allowance on the second death.
A worked example: reaching £1 million
Margaret is 78 and was widowed in 2019. Her husband left everything to her, so he used none of his allowances. She has two children and owns her home outright, valued at £400,000, plus £250,000 in savings, investments and personal effects, a total estate of £650,000.
On Margaret's death, her executors can claim:
Margaret's nil rate band: £325,000
Her late husband's unused nil rate band (transferred): £325,000
Margaret's residence nil rate band (home passes to her children): £175,000
Her late husband's unused residence nil rate band (transferred): £175,000
Combined allowance: £1,000,000
Margaret's £650,000 estate falls entirely within the £1 million allowance and no inheritance tax is payable. If her estate had been £1.2 million, her executors would owe 40% inheritance tax on £200,000, which is £80,000.
What is the downsizing provision?
The downsizing provision preserves the residence nil rate band when the deceased sold their home, downsized or moved out altogether before death. The sale or move must have happened on or after 8 July 2015, and assets of at least equivalent value must pass to direct descendants from the estate. Executors need detailed records of the property and its value at the time of sale.
HMRC documentation sometimes calls this the "downsizing addition". It exists so that people who sold a home late in life to fund care, move closer to family or free up capital are not penalised.
How do the 2027 pension changes affect the residence nil rate band?
From 6 April 2027, defined contribution pensions will be included in the estate for inheritance tax purposes, and the extra value will push some estates over the £2 million taper threshold. Under the current rules, most pensions pass outside the estate and are not counted towards the thresholds.
The change applies to deaths from 6 April 2027 onwards, so it is not yet in effect. Families with significant pension holdings should raise it with a solicitor or financial adviser before then. Our guide to defined contribution pensions and inheritance tax covers the detail.
How do you claim the residence nil rate band?
The executor or administrator claims the residence nil rate band as part of the inheritance tax return; HMRC never applies it automatically. For most taxable estates this means completing form IHT400 with form IHT435, the residence nil rate band claim form. Form IHT436 claims the transferred allowance from a late spouse or civil partner.
For an excepted estate, where a full account is not required, HMRC withdrew form IHT205 for deaths on or after 1 January 2022 (GOV.UK). The estate's values are now declared directly on the probate application itself, rather than on a separate HMRC form. Checking residence nil rate band eligibility is one of the first tasks when the estate includes a property, and it feeds into whether a grant is needed at all: see what is probate and how long does probate take in the UK. The inheritance tax position is also separate from any later sale of the home, which is covered in capital gains tax on inherited property.
Why do estates lose the residence nil rate band?
Estates most often lose the residence nil rate band because there is no direct descendant to inherit the home. The main patterns are:
No direct descendants. Someone with no children, grandchildren or stepchildren who leaves everything to a partner, sibling or friend cannot claim the relief. This is the single most common reason it is lost.
The home passes to the wrong person. A will leaving the home to a sibling, nephew, niece or unmarried partner does not qualify.
The wrong trust structure. A discretionary trust in the will can cause the relief to fail even when the family intended the home to reach the children.
The taper. Estates above £2 million lose the allowance pound for pound, and estates above £2.35 million lose it entirely.
No qualifying residence. A lifelong renter, or someone who only ever owned investment property they never lived in, cannot claim.
An unclaimed transfer. The transferable allowance from a late spouse must be claimed on form IHT436. It is not added automatically.
Frequently asked questions
RNRB stands for residence nil rate band, an extra inheritance tax allowance of up to £175,000 per person. It applies when a home the deceased owned and lived in passes to direct descendants such as children or grandchildren, on top of the standard £325,000 nil rate band.
The residence nil rate band adds up to £175,000 to the amount an estate can pass on before inheritance tax at 40% applies. Combined with the £325,000 nil rate band, an individual can leave up to £500,000 tax free, and a couple up to £1 million.
Yes. Stepchildren, adopted children and foster children all count as direct descendants for the residence nil rate band, alongside biological children, grandchildren and further lineal descendants. The spouse or civil partner of a direct descendant also qualifies, provided they had not remarried at the time of the deceased's death.
Yes. Someone who moved into a care home before death can still claim the residence nil rate band on their former home, provided they owned it and lived in it at some point during their ownership. There is no minimum period of occupation.
Yes, through the downsizing provision. If the deceased sold their home or downsized on or after 8 July 2015, the estate can still claim the residence nil rate band, provided assets of at least equivalent value pass to direct descendants. Records of the sale and the property's value are needed.
The transferable residence nil rate band still applies even though the allowance did not exist at the first death. The deemed unused RNRB for pre-2017 deaths is £100,000, but the percentage unused is what transfers, so most surviving spouses can claim the full additional allowance on the second death.
This article is for general information only and does not constitute legal advice. Individual circumstances vary. If you are dealing with an estate, consider taking advice from a solicitor who specialises in probate. For other guidance specific to your circumstances, speak to a funeral director, Citizens Advice, or a regulated financial adviser.