Your London Experts in IHT Planning
At CIGMA Accounting, a trusted accounting firm London and specialist tax advisors London, we help families, entrepreneurs, and high net worth individuals secure every possible Inheritance Tax allowance. One of the most valuable of these is the Residence Nil Rate Band (RNRB) – an extra £175,000 allowance that, when combined with the standard Nil Rate Band (NRB), can allow married couples or civil partners to pass on up to £1 million tax-free to their direct descendants.
Our team of chartered accountants London and personal tax advisor London specialists ensure you not only claim the RNRB but also integrate it into wider tax efficiency strategies, from business tax planning London to legacy planning accountant services.
Introduction – Passing on Your Home Tax-Efficiently
The Residence Nil Rate Band (RNRB) is one of the most powerful Inheritance Tax (IHT) allowances available to UK families. When used correctly, it allows parents and grandparents to pass on more of their home’s value to children or grandchildren without paying IHT.
Combined with the standard Nil Rate Band (NRB), a married couple or civil partners can potentially pass on up to £1 million tax-free to their direct descendants.
At CIGMA Accounting, we help clients maximise the RNRB alongside other allowances, ensuring their estate passes efficiently to the next generation. In this guide, we’ll explain who can claim the RNRB, how it works, and common pitfalls to avoid.
What is the Residence Nil Rate Band (RNRB)?
The RNRB is an additional IHT allowance of up to £175,000 (2021–2026 rates) that applies when a person’s primary residence is left to direct descendants after death.
It’s in addition to the standard NRB of £325,000, meaning an individual could pass on up to £500,000 tax-free. For couples, combining allowances can mean passing £1 million without paying IHT.
Who Qualifies for the RNRB?
The Basic Conditions
To claim the RNRB:
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The person who died must have owned a qualifying home or share of one.
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That home (or share) must be left to direct descendants – children, stepchildren, adopted children, foster children, or grandchildren.
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The home must have been a residence at some point – buy-to-lets that were never lived in do not qualify.
Partial Shares Qualify Too
Even if the deceased only owned a share of the home, the RNRB applies to the value of that share left to direct descendants.
Example:
A woman dies with a home worth £500,000. In her will, she leaves half (£250,000 value) to her stepson and half to her nephew. The RNRB applies to the £250,000 portion left to the stepson but is capped at £175,000 for that tax year.
Internal link opportunities:
Property valuation → Link to Property Valuation for Probate
Transferable RNRB Between Spouses or Civil Partners
Any unused RNRB from the first spouse or civil partner can be transferred to the surviving partner. This is not automatic – the executor must claim it from HMRC when the second partner dies, usually by completing IHT435 alongside the IHT400 account form.
When combined, this can double the RNRB for the surviving partner’s estate.
Expert Tip: Always keep copies of the first spouse’s estate records to make claiming the transferable RNRB easier.
Tapering for Large Estates
For estates valued over £2 million, the RNRB is reduced by £1 for every £2 over the threshold.
This means huge estates can lose the RNRB entirely – even if the home is passed to direct descendants. Strategic planning (such as lifetime gifting or charitable legacies) can help reduce the taxable value and restore eligibility.
Lifetime gifting strategies → Link to Gifting Strategy Page
Estate tax advisory → Link to Estate Tax Advisory
Downsizing and Selling Your Home
The RNRB can still apply if:
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The deceased downsized to a less valuable home after 8 July 2015, or
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They sold or gave away their home after that date.
In these cases, a downsizing addition can preserve the RNRB based on the value of the former home, provided equivalent assets are left to direct descendants.
Example:
A couple sold their £600,000 home and moved to a £300,000 flat. The £300,000 flat is left to their children, and they also leave £300,000 in investments to them. They can still claim the full RNRB, as the total value left to direct descendants matches or exceeds the original home’s value.
Eligible Homes
Only one home qualifies for the RNRB. If the deceased owned multiple residences, the executor can choose which one to apply.
The home does not have to be in the UK – but:
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UK-domiciled individuals are taxed on worldwide assets so that overseas homes can qualify.
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Non-UK domiciled individuals can only claim RNRB for UK property.
Case Study 1 – Maximising the RNRB for a £1 Million Tax-Free Legacy
Scenario: A married couple owns a home worth £700,000 and other assets worth £300,000. They leave everything to their children.
Result:
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Each spouse’s NRB = £325,000 × 2 = £650,000
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Each spouse’s RNRB = £175,000 × 2 = £350,000
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Total = £1 million tax-free inheritance.
CIGMA ensured all documentation for the transferable NRB and RNRB was complete, preventing an unnecessary £140,000 IHT bill.
How to Calculate the RNRB
To work out the available RNRB:
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Determine the open market value of the qualifying home.
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Deduct any mortgage or secured debt.
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Apply only the value left to direct descendants.
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Compare this to the maximum allowance for the year of death.
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Reduce the allowance if the estate exceeds £2 million (tapering).
RNRB calculator → Link to RNRB Calculator Tool
Case Study 2 – Restoring RNRB Eligibility Through Planning
Scenario: A widower’s estate is worth £2.4 million, including a £1 million home left to his children. Without action, his estate would lose the RNRB entirely due to tapering.
Solution: CIGMA advised making lifetime gifts to children and a charitable legacy to reduce the estate below £2 million before death. This restored full RNRB eligibility, saving £140,000 in IHT.
Case Study 3 – HNW Business Owner Combining RNRB with Corporate Structuring
Scenario: London-based entrepreneur with £3 million estate – £1.5m business assets, £1m home, £500k investments.
Challenge: Estate too large for RNRB due to tapering.
CIGMA Strategy:
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Applied Business Property Relief (BPR) to reduce the taxable estate.
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Used corporate tax advisor London services to restructure shareholdings.
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Gifted part of the business to children, lowering the estate value to under £2 million.
Result: Full RNRB eligibility regained alongside BPR, avoiding over £300,000 in IHT.
Business Property Relief → BPR Service
Corporate tax advisor London → Corporate Tax Advisory
How to Claim the RNRB
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Complete form IHT435 when filing the IHT400 for the estate.
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Please provide evidence of property ownership, value, and proof that it was left to direct descendants.
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For transferable RNRB, provide the first spouse’s death certificate, will, and estate valuation.
Common Mistakes to Avoid
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Not claiming transferable RNRB – many miss this due to lack of records.
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Leaving the home to non-descendants, such as siblings or friends.
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Overlooking downsizing rules – losing allowance unnecessarily.
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Failing to plan for tapering – large estates losing RNRB completely.
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Using outdated valuations – leading to disputes with HMRC.
Probate support → Link to Probate Support Service
Property valuation → Link to Property Valuation for Probate
Expert Tips for Maximising the RNRB
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Review your will to ensure property passes to direct descendants.
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Keep valuation records updated.
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Consider lifetime gifting strategies to stay below taper thresholds.
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Work with a qualified tax advisor to claim all allowances.
CIGMA’s Role in RNRB Planning
At CIGMA Accounting, we:
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Identify all available IHT allowances.
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Advise on property and estate structuring.
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Prepare IHT400 and IHT435 forms correctly.
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Plan for large estates to minimise or avoid tapering losses.
FAQs
Q: Can stepchildren inherit under RNRB rules?
A: Yes – stepchildren, adopted children, and foster children all qualify as direct descendants.
Q: Can an overseas property qualify?
A: Yes, for UK-domiciled individuals. For non-UK domiciled individuals, only UK property qualifies.
Q: Is the RNRB automatically applied?
A: No – it must be claimed on the IHT400 and IHT435 forms.
Q: Can I use RNRB if my home is in a trust?
A: Possibly, depending on the type of trust. Get advice first.
Call to Action
Don’t risk losing valuable IHT allowances. Use our RNRB calculator and book a free consultation with our IHT planning experts to ensure your family benefits from the maximum tax-free inheritance.
