Overview
The Residence Nil-Rate Band (RNRB) is a tax allowance that can be claimed against inheritance tax (IHT)
Key Points:
- From 5 April 2017 onwards, individuals can claim the residence nil rate band (RNRB) when their family home is inherited by their children or grandchildren.
- The RNRB cannot be applied to lifetime transfers made within seven years of the individual’s death.
- Similar to the main nil rate band, the RNRB can be transferred between spouses or civil partners.
- Currently, the maximum RNRB stands at £175,000, and this amount will remain unchanged until April 2028.
- It’s important to note that if an individual’s net estate exceeds £2 million, their RNRB will be gradually reduced by £1 for every £2 over this threshold.
Background
What is the Residence Nil-Rate band?
It was introduced in April 2017 to provide additional tax relief on the value of a person’s main residence when it is passed on to direct descendants upon their death.
The RNRB is in addition to the standard nil rate band, which is the amount of an individual’s estate that is exempt from inheritance tax. In the tax year 2023/24, the standard nil rate band is £375,000 per person. The RNRB provides an extra allowance specifically for the main residence.
The RNRB allows an individual to pass on their main residence, or a share of it, to direct descendants, such as children or grandchildren, without it being subject to inheritance tax, up to a certain limit. The maximum RNRB is currently £175,000.
Conditions
Property Eligibility
Main Residence
The property must have been the main residence of the deceased at some point. This means it must have been their primary residence, where they lived for a significant period of time.
Qualifying Property Types
The RNRB can be claimed on various types of property, including houses, flats, apartments, and houseboats. It can also apply to a share of the property if the deceased owned only a portion of it.
Ownership and Occupation
The property must have been owned by the deceased and occupied by them as their main residence at some stage. However, it is not necessary for the deceased to have been living in the property at the time of their death, as long as it meets the main residence requirement.
Downsizing Provisions
In certain cases where the deceased has sold or downsized their property after July 8, 2015, it may still be possible to claim the RNRB. There are specific rules and calculations related to downsizing provisions, which can provide an opportunity to retain some or all of the RNRB even if the property being inherited is different from the one that was previously owned.
