Residence Nil Rate Band Explained — The £175,000 Property Allowance

What Is the Residence Nil Rate Band?

The residence nil rate band (RNRB) is an additional inheritance tax allowance of £175,000 that can be applied when a residential property forms part of an estate and is left to direct descendants. It sits on top of the standard nil rate band (£325,000), bringing the combined threshold for a single individual to £500,000.

Like the standard NRB, the RNRB is frozen until at least 2030 following the 2024 Autumn Budget.

Who Qualifies as a Direct Descendant?

HMRC defines direct descendants broadly. They include:

• Children (biological, adopted, fostered or step-children)
• Grandchildren and more remote descendants
• The spouse or civil partner of any of the above

Siblings, parents, nieces, nephews and unmarried partners do not qualify. Leaving a property to a trust can also jeopardise the RNRB unless the trust is set up specifically to benefit qualifying descendants.

The Qualifying Residential Interest

The property must have been the deceased's main home at some point. It does not need to be their home at the date of death — for example, a property sold to move into residential care can still qualify via the downsizing addition (see below). Buy-to-let properties that were never the deceased's main home do not qualify.

Only one property can qualify per person.

The £2 Million Taper

For estates valued above £2 million, the RNRB is reduced by £1 for every £2 above that threshold. An estate worth £2,350,000 would lose the entire RNRB. This cliff edge is one reason why IHT planning for larger estates requires professional advice.

The Downsizing Addition

If someone sells or downsizes their home on or after 8 July 2015 and the sale proceeds remain in the estate at death, a downsizing addition may restore some or all of the lost RNRB. This allows people to move into smaller accommodation or care homes without losing the benefit of the allowance — provided the estate ultimately passes to direct descendants.

Transferring Unused RNRB Between Spouses

Any unused RNRB from the first spouse or civil partner to die can be transferred to the survivor's estate. This applies even if the first death occurred before the RNRB was introduced (before April 2017), meaning the survivor's estate can claim up to £350,000 in RNRB — a significant advantage for married couples.

How to Claim

The RNRB is claimed by the executor on the IHT400 form (and supplementary IHT435 and IHT436 schedules) submitted to HMRC. It is not automatic — the executor must actively claim it. This is a common oversight that can leave families with a higher-than-necessary IHT bill.

Check Your Position

Use our [Inheritance Tax Calculator](/inheritance-tax-calculator) to see whether the RNRB applies to your estate and how much it could save. The calculator factors in both the standard NRB and the RNRB to give you a realistic estimate of any IHT liability.

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