Residence Nil-Rate Band (RNRB) Explained UK: £175K IHT Allowance 2025

The Residence Nil-Rate Band (RNRB) is an additional Inheritance Tax allowance worth up to £175,000 when you pass your home to your children or grandchildren. Combined with the standard Nil Rate Band, couples can pass on up to £1 million tax-free. This guide explains how RNRB works, who qualifies, and how to claim it.

What is Residence Nil-Rate Band?

The Residence Nil-Rate Band (RNRB) was introduced in April 2017 to help families pass on the family home without Inheritance Tax.

Who Qualifies for RNRB?

To qualify for the full Residence Nil-Rate Band, ALL these conditions must apply:

1. You Owned a Home

The deceased must have owned a home (or share of a home) at the time of death. This includes:

• House, flat, apartment
• Share of jointly owned property
• Formerly owned home (if downsized after 8 July 2015 - see downsizing relief below)

2. Home Passes to Direct Descendants

"Direct descendants" means:

• Children (including adopted, step-children, foster children)
• Grandchildren
• Great-grandchildren
• Spouses/civil partners of descendants (if descendant died before deceased)

Does NOT include:

• Siblings
• Nieces and nephews
• Friends
• Unmarried partners
• Charities

3. Estate Under £2 Million

If the estate exceeds £2 million, the RNRB is gradually reduced (see taper section below).

How Much RNRB Can You Claim?

The £2 Million Taper

If the estate exceeds £2 million, the RNRB is reduced by £1 for every £2 the estate exceeds the threshold.

Transferable RNRB: Claiming Your Late Spouse's Allowance

If your spouse or civil partner died before you, you may be able to claim their unused RNRB - even if they died before RNRB was introduced in 2017.

When Can You Claim Transferable RNRB?

You can claim unused RNRB if:

• Your spouse/partner died before you
• They didn't use their RNRB (e.g., left everything to you, not children)
• They died before 2017 (RNRB didn't exist yet - 100% unused)

Amount you can claim:

• Up to 100% of late spouse's unused RNRB (£175,000 if completely unused)
• YOUR RNRB (£175K) + THEIR unused RNRB (up to £175K) = up to £350,000

Downsizing Relief

If you downsized or sold your home after 8 July 2015, you may still claim RNRB through "downsizing relief" - even if you don't own a property when you die.

When Does Downsizing Relief Apply?

You can claim if:

• You owned a home after 8 July 2015
• You downsized to smaller property, OR
• You sold property and moved to care home, OR
• You sold property for any reason
• You left assets of equivalent value to direct descendants (cash, investments, etc.)

How RNRB Combines with Standard Nil Rate Band

RNRB works alongside the standard Nil Rate Band (£325,000) to increase your total tax-free allowance:

How to Claim RNRB

RNRB is claimed through Inheritance Tax forms when applying for probate.

Forms Required

• IHT435: Main RNRB schedule (included with IHT400 or IHT205)
• IHT436: If claiming transferable RNRB from late spouse

Information Needed

• Property address and value at death
• How property was owned (sole/joint)
• Who inherited the property (children's names)
• Whether property was main residence
• Downsizing details if applicable
• Late spouse's details if claiming transferable RNRB

Maximizing RNRB Through Estate Planning

1. Update Your Will

Ensure your will explicitly leaves your home to children or grandchildren:

• If married: Can leave to spouse first, then children on second death
• Use "mirror wills" for couples (both leave home to each other, then children)
• Consider life interest trust if want spouse to live in home but children to inherit

2. Keep Estate Under £2 Million

To avoid RNRB taper:

• Make lifetime gifts (use annual £3K exemption)
• Give to charity (charitable gifts reduce estate)
• Spend down estate
• Consider life insurance written in trust (outside estate)

3. Downsizing Protection

If planning to downsize or move to care home:

• Keep records of property values
• Ensure downsizing after 8 July 2015 to qualify
• Leave equivalent value to children

RNRB and Other Reliefs

RNRB works alongside other Inheritance Tax reliefs:

• Spouse exemption: Unlimited transfers to spouse (but doesn't use RNRB)
• Business Property Relief: 100% relief on business assets
• Agricultural Property Relief: 100% relief on farms
• Charity exemption: Gifts to charity fully exempt

Frequently Asked Questions

Can I claim RNRB if I leave my home to my spouse?

No, but you don't lose it. Your unused RNRB transfers to your spouse. When your spouse dies and leaves the home to your children, they can claim BOTH RNRB allowances (up to £350,000).

What if I own a share of a property with my sibling - can I still claim RNRB?

Yes, RNRB applies to your share of the property if it passes to your children. If your share is worth less than £175K, your RNRB is limited to that share value.

Can I claim RNRB if my child died before me?

Yes, if you leave the property to your grandchildren (your deceased child's children). The property can pass "down" a generation and still qualify.

What if I have more than one property?

RNRB applies to your main residence only. If you own multiple properties, executors can nominate which property to use for RNRB within 2 years of death (usually choose the most valuable).

Does RNRB apply to property abroad?

Yes, RNRB can apply to foreign property if it was your main residence and passes to direct descendants. Complex rules apply - seek specialist advice.