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What is the Residence Nil Rate Band?
The Residence Nil Rate Band (RNRB) is an additional inheritance tax (IHT) allowance that can be claimed by some estates where the deceased owned their own home or a share in one.
How much is the Residence Nil Rate Band?
For deaths after April 2021 the RNRB amount is £175,000. This will remain fixed until April 2026.
How does an estate qualify for Residence Nil Rate Band?
There are two main elements to qualify for RNRB –
Residence – the deceased’s estate must include a home, or a share in one, in which the deceased lived at some time.
Direct descendant – the home, or a share of it, must pass to the deceased’s direct descendants. Direct descendants include children, step-children and grandchildren or their spouses/civil partners.
What if the house has already been sold to pay care fees?
If the deceased sold their home on or after 8 July 2015 it may still be possible to claim the RNRB by claiming ‘downsizing allowance’.
It may also be possible to claim ‘downsizing allowance’ if the deceased downsized to a less valuable home.
Are there any limits on the amount that can be claimed?
The RNRB will be limited to the lower of £175,000 or the value of the share in the property passing to direct descendants.
Where the value of the deceased’s estate exceeds £2 million the amount of RNRB will be reduced (tapered) by £1 for every £2 over £2 million.
Are there higher allowances for married couples or civil partners?
It is possible for a surviving spouse to claim any RNRB that was not used when their spouse died. This is called Transferable Residence Nil Rate Band (TRNRB). TRNRB can be claimed even if the first spouse died before 6 April 2017, even though RNRB was not available when they died.
The availability of TRNRB means that married couples and civil partners can potentially claim a combined allowance of up to £350,000.
Checking whether an estate is eligible to claim Residence Nil Rate Band and calculating the amount of allowance available can be complicated. At Stone King our team of specialists can assist you to claim all available allowances and maximise your inheritance tax savings. Contact a member of our team to find out how we can help.
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