The Residence Nil Rate Band (RNRB) can significantly reduce, or entirely remove, Inheritance Tax (IHT) on a family home. Despite this, many estates miss out because the rules are technical and the paperwork is easy to get wrong. This guide explains what the allowance is, how it is calculated, and the practical steps for claiming it under the law of England and Wales.
What is the Residence Nil Rate Band?
The RNRB is an additional IHT allowance of up to £175,000 per person that applies when a home the deceased owned and lived in passes to direct descendants. It sits on top of the ordinary nil rate band of £325,000. Because IHT is charged at 40% on anything above the available thresholds, a full RNRB claim can reduce the tax bill by up to £70,000 for a single person’s estate, or £140,000 for a couple who both transfer their allowances.
Both the nil rate band and the RNRB are frozen until 5 April 2031, a freeze confirmed at Budget 2025, delivered on 26 November 2025. As property values rise with inflation, more estates will be pulled above the threshold, creating a steady increase in the effective IHT burden.
The allowance:
- Applies only to a qualifying residential interest, broadly a home that the deceased occupied, not a buy-to-let they never lived in
- Is available only when the home (or the sale proceeds) passes to direct descendants. The statutory list at section 8K of the Inheritance Tax Act 1984 covers children, step-children, adopted children, foster children, children for whom the deceased was appointed guardian or special guardian, and all of their lineal descendants, together with the spouses and civil partners of those descendants
- Can be transferred to a surviving spouse or civil partner if unused on the first death, potentially doubling the relief
Conditions for claiming the RNRB
To secure the allowance, all of the following requirements must be met.
The estate must include a qualifying residence. A buy-to-let property that the deceased never occupied will not qualify.
The property must be “closely inherited”. That means left outright to direct descendants, or to certain types of trusts set up for them.
The estate must be within the taper threshold. Estates worth more than £2 million lose £1 of RNRB for every £2 over that threshold, and a single £175,000 allowance disappears entirely at £2.35 million. Where a full transferred allowance is also available, the combined £350,000 is not extinguished until £2.7 million.
A formal claim must be made on the correct IHT forms. IHT435 is the form submitted with the IHT400 to claim the RNRB formally. Without completing IHT435, the claim is not made and the relief will not be applied. HMRC does not apply it automatically.
If any one of these conditions is not met, the allowance is lost.
How the RNRB is calculated
Standard case
- Estate: £600,000 (including a house worth £300,000)
- Ordinary nil rate band: £325,000
- Residence nil rate band: £175,000
- Total tax-free amount: £500,000
Only £100,000 is taxed at 40%, so the IHT bill is £40,000.
Tapered case: estate over £2 million
- Estate: £2.2 million
- Excess over taper threshold: £200,000
- RNRB reduction: £200,000 ÷ 2 = £100,000
- Available RNRB: £175,000 – £100,000 = £75,000
Transferable RNRB
If the first spouse leaves their estate entirely to the surviving spouse (using the spouse exemption), they use none of their RNRB, so 100% transfers to the survivor, effectively doubling the available RNRB to £350,000 in 2026/27. Combined with two ordinary nil rate bands, a married couple could potentially pass up to £1 million to their children without any Inheritance Tax applying.
Unlike the standard nil rate band transfer, the transferable RNRB is expressed as a percentage. The executor of the surviving spouse’s estate must claim it using form IHT436, and it is not applied automatically by HMRC, regardless of when the first spouse died.
There is a deadline, and it is the detail that catches executors out. The claim must be made within two years of the end of the month in which the second person died, or within three months of the executors first acting if that is later. HMRC can extend that period at its discretion, but the allowance is lost if nobody claims it (section 8L of the Inheritance Tax Act 1984).
The impact of pension changes from April 2027
From 6 April 2027, most unused pension funds and pension death benefits will be included in an estate for IHT purposes. That legislation received Royal Assent on 18 March 2026 as part of the Finance Act 2026. This is now law. In practice, adding a large pension pot to an estate could push the total above the £2 million taper threshold, reducing or eliminating the available RNRB. Our guide covers the April 2027 pension changes in full.
Common issues and mistakes
Families often run into avoidable problems. Here are the most frequent ones.
Leaving the house to a discretionary trust. A broad discretionary trust for grandchildren or wider family usually prevents the RNRB, because the property is not “closely inherited”. There is a remedy: if the trustees appoint the property out to direct descendants within two years of the death, section 144 of the Inheritance Tax Act 1984 reads the appointment back as though the will had said so. The appointment has to give the descendant an absolute or qualifying interest, though, so appointing onto a further trust contingent on reaching an age above 18 still fails the test.
Missing the downsizing rules. If the deceased sold or downsized their home after 8 July 2015 and no longer owns a qualifying property at the date of death, a downsizing addition may allow a partial or full RNRB claim. The downsizing addition broadly preserves the RNRB that would have been available on the former property, provided the estate is left to direct descendants. You must include the correct schedules with the return to claim this.
Overlooking tapering. Executors sometimes forget that certain reliefs (such as Business Property Relief) do not reduce the estate value for taper purposes. HMRC applies the taper threshold to the value of the estate after liabilities but before exemptions and reliefs, which is a higher figure than the one most people have in mind.
Missing the claim deadline. This costs the relief rather than attracting a penalty. HMRC can accept a late claim at its discretion, but nothing obliges it to, so the allowance can simply be lost. Check the IHT435 and, where a transfer is being claimed, the IHT436 carefully before submission.
Late payment or an inaccurate account. This is a separate problem with separate consequences. Interest runs on inheritance tax paid late, and an inaccurate account can attract a penalty in its own right, whether or not the RNRB claim was made in time.
IHT is complex. Seeking legal advice before submitting your claim is the best way to avoid these traps.
How to apply for the RNRB
To claim the RNRB, you must give HMRC the correct information and complete the right IHT schedules. Follow the steps below.
Step 1: Gather the information
Confirm and collect the following before completing any forms:
- Address, title number and latest valuation of the residence
- Details of any previous main residence sold since 8 July 2015
- A copy of the will, any deed of variation, and relevant trust deeds
- The gross value of the estate before exemptions and reliefs
Step 2: Complete the HMRC forms
Three forms are relevant:
- IHT400: the main return for estates that exceed the excepted estate limits
- IHT435: the claim for the RNRB itself
- IHT436: the claim for any transferable RNRB from a deceased spouse or civil partner
The forms ask for the value of the qualifying residence, details of direct descendants, and the taper calculation. Include a RICS valuation as supporting evidence, or a written valuation from an estate agent for lower value or straightforward properties.
Step 3: Submit and pay
Send the return to HMRC within 12 months of the end of the month in which the death occurred. Any IHT due must be paid by the end of the sixth month after the month of death to avoid interest. An instalment option is available if the estate consists mainly of property.
Step 4: Post-submission adjustments
If you discover additional assets, or the property sells for a different figure than valued, you must file a corrective account with HMRC. They will recalculate the allowance and adjust any tax accordingly. Clear records at every stage make this process straightforward.
Why professional advice matters
The RNRB rules intersect with trust law, property law and detailed IHT schedules. As thresholds remain frozen and more estates are caught, HMRC enquiries are increasing. A solicitor or probate practitioner can:
- Check that the will structure does not unintentionally block the allowance
- Advise on deeds of variation within two years of death, which can redirect assets and secure the RNRB
- Calculate taper reductions accurately and document the calculation on file
- Liaise with HMRC to resolve any enquiries
Proper advice often pays for itself. Errors in this area can easily cost tens of thousands of pounds in extra tax or penalties.
Get advice through The Probate Network
If you are dealing with an estate and want clear, practical help with the residence nil rate band or any other aspect of probate, The Probate Network connects you with regulated, experienced professionals who can explain your options and handle the paperwork. Visit The Probate Network today to book a free consultation.
Frequently asked questions
What is the Residence Nil Rate Band for 2026/27?
For the 2026/27 tax year, the maximum RNRB is £175,000. It is additional to the standard £325,000 nil rate band, potentially giving a qualifying individual a total threshold of £500,000. Both bands are frozen at their current levels until 5 April 2031, confirmed at Budget 2025.
Who counts as a direct descendant for RNRB purposes?
Direct descendants include children (biological, adopted, step-children or foster children), children for whom the deceased was appointed guardian or special guardian, grandchildren and their lineal descendants. Spouses or civil partners of those descendants also qualify, and so does the widow, widower or surviving civil partner of a descendant who died first, provided they have not since remarried or entered a new civil partnership. Nieces, nephews and unrelated beneficiaries do not. The property must pass to these individuals outright, or through certain qualifying trusts, for the allowance to apply.
What happens to the RNRB if I sell my home before I die?
If the deceased sold or downsized their home after 8 July 2015 and no longer owns a qualifying property at the date of death, a downsizing addition may allow a partial or full RNRB claim. You must include the correct downsizing schedules with the IHT return; the relief does not apply automatically.
How will the April 2027 pension changes affect the RNRB?
From 6 April 2027, most unused pension funds and pension death benefits will be included in an estate for IHT purposes. For some estates, this will push the total estate value above the £2 million taper threshold, reducing or eliminating the available RNRB. Most estates will continue to have no IHT liability following these changes. The government estimates that around 10,500 estates out of 213,000 with inheritable pension wealth will become liable where they would not previously have been, that a further 38,500 estates will pay more inheritance tax than they otherwise would, and that the average liability rises by around £34,000. HMRC treats these as static estimates that take no account of how people change their behaviour, so they are best read as a ceiling rather than a forecast. Speak to a solicitor or adviser to review how your estate may be affected.
This article is for general guidance only and does not constitute legal, tax or financial advice. Rules and thresholds can change, and every estate is different. For advice on your own circumstances, speak to a qualified professional. You can book a free legal consultation through The Probate Network.
