Residence Nil Rate Band

Suzanna Baker

What is the Residence Nil Rate Band?

The Residence Nil Rate Band is an additional nil rate band. It can be claimed upon a person’s death by their personal representatives to reduce the amount of inheritance tax payable on an estate. It can be applied together with the ordinary nil rate band, which is currently £325,000 per person.

How much is the Residence Nil Rate Band?

At present, the Residence Nil Rate Band is £175,000. It increased from £150,000 in April 2020.

Can my estate claim the Residence Nil Rate Band?

The main requirements to be able to claim the Residence Nil Rate Band are as follows:

• You must own or have a ‘qualifying interest’ in a residential property. It is not necessary for the property to be your main residence or to be in the UK.
• You must have lived in the property at some point during your lifetime.
• The property must be ‘closely inherited’ on your death. ‘Closely inherited’ means by a lineal descendant (including stepchildren and foster children), a spouse or civil partner of a lineal descendant, or a surviving spouse or civil partner of a lineal descendant who has not re-married.

Does the value of my estate affect claiming the Residence Nil Rate Band?

Yes, if the value of your estate exceeds £2 million on your death, the RNRB allowance will be tapered by £1 for every £2 of your estate that exceeds this threshold. Based on the current allowance of £175,000, if your estate exceeds £2.3 million you will be unable to claim the RNRB. However, depending on the total value of your estate, it may be possible to fall within this threshold by including specific provisions within your Will.

What if I have sold my house during my lifetime?

If you have ‘disposed’ of a residence on or after 8 July 2015, either completely (e.g. selling your house and moving into a care home) or by moving to a less valuable property, a downsizing allowance is available.

Can the Residence Nil Rate Band be transferred between spouses?

Yes, like the ordinary nil rate band is it possible to transfer any unused RNRB between spouses The second spouse must have died on or after 6 April 2017.

Do I need to draft my Will in a certain way to claim the Residence Nil Rate Band?

To claim the RNRB your estate must pass in quite a specific way. The RNRB requirements can be complex and so to ensure that these are satisfied we recommend you seek legal advice on your Will.