Inheritance Tax can be a complicated area and whilst the Residence Nil Rate Band was introduced back in 2016, this legislation is always worth a revisit to ensure interpretation of the key aspects is correct.

In summary, if a person dies on or after 6 April 2017, and the estate includes a qualifying residential interest (QRI) at their death and the QRI is closely inherited, then an additional tax allowance of £175,000 (as at 2022) could be claimed. The RNRB will be tapered if the deceased person's estate exceeds £2 million and estates with a value in excess of £2.35 million will not benefit from the RNRB. The concept of transferring the RNRB exists in the same way as the NRB so it can be carried forward to the spouse or civil partners estate.

Qualifying Residential Interest

The RNRB will apply to one property only where it is both included in the deceased's estate and was lived in at some stage by the deceased before their death. It should be noted that it does not have to be the main home and their is no minimum period for living in or owning the property. A property that the deceased owned but never lived in (such as a buy to let) will not be eligible for the RNRB. If the deceased owned more than one home, their personal representatives can nominate which one should qualify for the RNRB.

Closely Inherited

What does "closely inherited" actually mean? To qualify for the RNRB the property or share in it must be inherited by a "lineal descendant" which means";

  • A child, grandchild or other lineal descendant of that person
  • spouse or civil partner of a lineal descendant (including their widow, widower or surviving civil partner)
  • a child who is or was at any time that person's step-child
  • an adopted child of that person
  • a child who was fostered at any time by that person
  • a child where that person is appointed as a guardian or special guardian for that child when they're under 18


So when is property "inherited"?

  • When is was owned absolutely by the deceased and is closely inherited as an absolute gift i.e. by Will or under the rules of Intestacy or if property passes by survivorship to the co-owner
  • When it was owned absolutely by the deceased and is gifted into a qualifying trust on death i.e. an immediate post death interest trust, disabled persons trust, bereaved minors trust or 18-15 trust
  • Given away in deceased's lifetime but subject to reservation of benefit and the gift was made to lineal descendants

Taper Threshold

The RNRB will be tapered for estates with a net value, after deducting liabilities but before any exemptions and reliefs (including the NRB, spouse exemption and BPR/AGR) of more than £2m. For every £2 over the threshold £1 is lost. Meaning estates with a value in excess of £2.35 million will not benefit from the RNRB.

Transfer of unused RNRB

This works in exactly the same way as the ordinary nil rate band and the amount to carry forward is a percentage of the RNRB of the surviving spouse or civil partner. If the predeceased spouse or civil partner died before 6 April 2017, the RNRB will never have been used so will be available to carry forward on death of the surviving spouse or civil partner (subject to the taper rules as above)

The value of the Home for RNRB purposes

The value of the home for RNRB purposes will be the open market value less any liabilities secured on it. If the value of the Qualifying Residential Interest is valued at lower than the available RNRB then the relief is limited accordingly.


To acknowledge that a property may be sold to fund nursing care as an example, measures were introduced to compensate for the loss of the RNRB on downsizing. This applies to those that have downsized or sold their properties on or after 8 July 2015. The RNRB remains available provided that the value of the Qualifying Residential Interest (now cash) is represented in the deceased's estate at their death and is closely inherited

Do you have further questions? Please feel free to email or call 01522 500823 and we will be happy to discuss your clients situation and what this may mean for them.



Source: Institute of Professional Willwriters.