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The Residence Nil Rate Band (RNRB) was introduced in 2017 and has been one of the most significant changes to inheritance tax in recent years. When it applies, it can save up to £70,000 in IHT (40% of £175,000). But the conditions are strict, the taper catches many larger estates, and the rules about who counts as a direct descendant are frequently misunderstood.
The standard nil rate band (NRB) allows every individual to pass up to £325,000 free of inheritance tax. The Residence Nil Rate Band is an additional allowance of up to £175,000 (in 2026/27), giving a potential combined allowance of £500,000 for a single individual — or £1,000,000 for a couple using both their NRBs and both their RNRBs.
IHT435 is the form submitted with the IHT400 to formally claim the RNRB. Without completing IHT435, the claim is not made and the relief will not be applied — HMRC does not apply it automatically.
The RNRB applies only where all of the following conditions are met:
The amount of RNRB available is the lower of the value of the qualifying property (or the deceased's share of it) and the maximum RNRB (£175,000 in 2026/27). If the deceased's share of the property is worth only £120,000, the maximum RNRB claimable is £120,000 — not the full £175,000.
This is one of the most frequently misunderstood aspects of the RNRB. A direct descendant for RNRB purposes includes:
A direct descendant does not include:
Common misconception: Many people assume that if their will leaves the family home to a niece or nephew, the RNRB will still apply. It will not. The RNRB is only available if the property passes to children, grandchildren, or stepchildren (and their spouses). If the deceased has no children or grandchildren, the RNRB is not available — regardless of what the will says.
The RNRB is the lower of:
Margaret died owning a home worth £350,000 outright, which she leaves to her daughter. The RNRB is the lower of £350,000 and £175,000 = £175,000. Combined with her standard NRB of £325,000, her total tax-free allowance is £500,000.
Robert died owning a 50% share of a property worth £260,000 (his share: £130,000), which he leaves to his son. The RNRB is the lower of £130,000 and £175,000 = £130,000. He cannot claim the full £175,000 because his property share is worth less than the cap.
The RNRB is gradually withdrawn for larger estates. For every £2 that the net estate (after deducting liabilities but before applying any reliefs or exemptions) exceeds £2,000,000, the available RNRB is reduced by £1.
This means:
Worked example: David's estate is worth £2.2 million net. The RNRB taper applies: (£2,200,000 − £2,000,000) ÷ 2 = £100,000 reduction. RNRB available = £175,000 − £100,000 = £75,000.
Note that the £2 million taper threshold applies to the net estate — after deducting debts, but before applying the spouse exemption or charitable exemptions. This can produce counterintuitive results in some estates.
If the deceased sold or downsized their home, or moved into residential care, after 8 July 2015 and no longer owns a qualifying property at the date of death, a downsizing addition may allow a partial or full RNRB claim.
The downsizing addition broadly preserves the RNRB that would have been available on the former property, provided the estate is left to direct descendants. The calculation is complex and depends on the value of the former home relative to the current RNRB.
IHT435 includes specific questions about downsizing to work through the calculation. If the deceased sold their home many years before death, you will need records of the sale proceeds and the date of the sale.
IHT435 guides you through a structured set of questions:
If the deceased's spouse or civil partner died before them and did not use their full RNRB, the unused portion can be transferred via IHT436. IHT436 is always submitted alongside IHT435 — it tops up the RNRB but cannot be submitted without IHT435.
If both forms apply, the combined RNRB (own RNRB plus transferred RNRB from IHT436) can be up to £350,000 — but the £2 million taper still applies to the total.
The RNRB does not apply if the residential property is left to a trust — with two exceptions: a bereaved minor's trust (a trust for children under 18 who have lost a parent) and a disabled person's trust.
If a will places the family home into a discretionary trust, even one where the children are the beneficiaries, the RNRB is not available. Many wills drafted before 2017 (when the RNRB was introduced) included trust structures that were tax-efficient at the time but now inadvertently block the RNRB. If this applies, it may be worth seeking legal advice about whether a deed of variation could re-route the property.
IHT436 transfers unused RNRB from a deceased spouse or civil partner — potentially adding up to £175,000 extra tax-free allowance. Conditions and calculation guide.
IHT402 transfers unused nil rate band from a deceased spouse or civil partner. Claim up to £325,000 extra tax-free allowance. Step-by-step completion guide with worked examples.
IHT405 lists all property, land, and buildings in the estate for inheritance tax. Get the valuation right to avoid HMRC enquiries. Step-by-step completion guide.
IHT406 lists all bank accounts, savings, and ISAs in the estate. How to get date-of-death balances, handle joint accounts, and include accrued interest.
IHT407 covers furniture, jewellery, cars, art, and personal items in the estate. How to value household goods for HMRC, when professional valuations are needed.
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