Residence Nil Rate Band (RNRB) Calculator

How the residence nil rate band works

The residence nil rate band (RNRB) is an extra tax-free amount of up to £175,000 that applies when a home, or a share of one, passes to direct descendants on death. It sits on top of the £325,000 nil-rate band, so a single person can leave up to £500,000 free of Inheritance Tax, and a couple up to £1,000,000. Both bands are frozen until 5 April 2031.

The RNRB you get is the lower of two figures: the value of the home (after any mortgage) that goes to direct descendants, and the maximum band after the taper. A £120,000 share of a flat left to a daughter in a £700,000 estate gives an RNRB of £120,000, not £175,000; the unused £55,000 cannot be set against other assets.

The home must be a property the person lived in at some point. Only one property can qualify, and the executors can choose which. A buy-to-let they never lived in does not count.

The £2 million taper

The RNRB is reduced by £1 for every £2 the estate is worth over £2,000,000. The estate value here is everything owned less debts, before any exemptions or reliefs, so leaving money to a spouse or charity, or having business property that qualifies for relief, does not bring the estate under the taper. A single person’s RNRB is gone at £2,350,000, and a full transferred band at £2,700,000.

In the £2,300,000 estate below, the band falls to £25,000 and the Inheritance Tax bill is £780,000. The same family with an estate of £2,000,000 keeps the full £175,000 and pays £600,000: the last £300,000 of value costs 60% in tax because of the taper. Gifts made more than 7 years before death, or spending, can keep an estate under £2,000,000.

Transferring unused RNRB from a late spouse

Any RNRB not used when the first spouse or civil partner died passes to the survivor as a percentage, up to 100%. That doubles the survivor’s maximum to £350,000. The percentage is applied to the band in force at the second death, so it benefits from any rise in between.

If the first death was before 6 April 2017, when the RNRB started, the late spouse is treated as having had £100,000 available and none used, so 100% transfers, even if they left everything to the children.

Example: the first spouse used half of their band, so 50% transfers. The survivor’s maximum is £262,500, and with a £500,000 home going to the children the RNRB is £262,500. With a full transferred nil-rate band too, the £900,000 estate pays £0.

Executors claim the transfer on form IHT436 with the IHT400 within 2 years of the second death. HMRC needs the first death’s will and any IHT forms, so keep them.

Downsizing, selling or giving away the home

If the person sold, gave away or moved to a less valuable home on or after 8 July 2015, a downsizing addition can restore RNRB that would otherwise be lost. Direct descendants must still inherit some of the estate. The addition cannot take the RNRB above what it would have been had the person kept the original home.

Example: a widow sold a £400,000 house and moved into a £100,000 flat that she leaves to her son with the rest of an £800,000 estate. Without the addition her RNRB would be £100,000; with a £75,000 downsizing addition it becomes £175,000, the full band. For disposals between 8 July 2015 and 5 April 2017 the maximum RNRB at the time is treated as £100,000.

Who counts as a direct descendant

• Children, grandchildren and other lineal descendants, including adopted, foster and stepchildren.
• The spouse or civil partner of a direct descendant, including their widow or widower.
• Not nieces, nephews, siblings, parents or friends. A home left to them gets no RNRB.
• Leaving the home to a surviving spouse does not use the RNRB; it is exempt anyway, and the unused band transfers.