IHT unused Residence Nil Rate Band (RNRB)

The Inheritance Tax Residence Nil Rate Band (RNRB) is a transferable allowance available to married couples and civil partners when their main residence is inherited by direct descendants, such as their children or grandchildren.

The RNRB is available at a maximum allowance of up to £175,000 per person. This allowance can be transferred to a surviving spouse or partner if it remains unused. It is in addition to the existing £325,000 Inheritance Tax (IHT) nil-rate band.

Together with the current Inheritance Tax limit of £325,000, this allows married couples and civil partners to pass on property valued up to £1 million free of IHT to their direct descendants.

However, the transfer of the unused RNRB does not happen automatically; it must be claimed from HMRC when the second spouse or civil partner passes away. Typically, the executor of the estate will file a claim to transfer the unused RNRB from the estate of the first deceased spouse or civil partner. This transfer can also be claimed even if the first spouse or civil partner died before the RNRB was introduced on 6 April 2017.

It is important to note that the RNRB is tapered for estates valued over £2 million, even if the family home is left to direct descendants. For every £2 that the estate exceeds the £2 million threshold, the RNRB is reduced by £1, potentially eliminating the allowance entirely.

If you need Inheritance Tax (IHT) advice, please give our expert and friendly team a call on 01380 723692 or email us here.