• Alex Howard

Making Use Of The Transferable Residence Nil Rate Band

There are two nil rates bands for inheritance tax – the nil rate band of £325,000 and the Residence Nil Rate Band, set at £175,000 for 2020/21. Together, it is possible for spouses and civil partners to leave a joint estate worth £1 million (2020/21 figures) free of inheritance tax. However, this depends on the ability to fully utilise the RNRB.

Nature of the RNRB

The RNRB is available where the deceased’s interest in a residential property, which has been their main residence at some point, is passed to a direct descendant on their date. The value of the RNRB is the lower of:

· the net value in the interest of the residence property (i.e. the value of the property, less any liabilities such as a mortgage); and

· the RNRB at the year of death.

The RNRB is set at £175,000 for 2020/21. It will be increased annually in line with inflation.

The RNRB can only be used to shelter inheritance tax on one property. Where there is more than one residential property in the estate that has been a main residence at some point, the personal representatives can nominate which property passed on death will benefit from the RNRB.

The RNRB is also available where the deceased downsized on or after 8 July 2015, or ceased to own a residence after that date, as long equivalent assets are left to direct descendants.

A direct descendant is a child (including a step-child, an adopted child or a foster child) and their lineal descendants.

Reduced RNRB for estates in excess of £2 million

The RNRB is reduced by £1 for every £2 by which the deceased’s estate exceeds £2 million.

Transferable nature of the RNRB

As with the nil rate band, any portion of the RNRB unused on the death of the first spouse or civil partner can be used on the death of the surviving spouse or civil partner. However, the total available on the second death cannot exceed the value of the residence passed to direct descendants.

The ability to use the unused portion of a late spouse or civil partner’s RNRB is not automatic – a claim must be made by the executors or personal representative on the second death. A claim to transfer the unused portion of the RNRB should be made on form IHT436. A claim to use it on the estate of the surviving spouse must also be made – this is done of form IHT435.

There is a time limit of two years from the end of the month in which the second spouse or civil partner died for making the claim.


Betty died on 10 October 2018 leaving her entire estate worth £600,000 to her husband Stan, including her interest in the marital home. At the time of her death, the RNRB was £125,000.

Stan died in June 2020, leaving an estate valued at £1.3 million. The estate included his main residence, valued at £800,000, which was left equally to his three children.

As Betty had not used any of her RNRB, Stan’s personal representatives claim to transfer 100% of her RNRB and use it on Stan’s estate. The RNRB available to use against Stan’s estate is £350,000 (Stan’s own RNRB of £175,000 plus 100% of Betty’s nil rate band at the 2020/21 level of £175,000) as this is less than the value of the residence transferred on death to their direct descendants.

Want to know more or speak to us?

If you have any questions on this topic or are considering a change of Accountants, please give us a call as we would love to talk to you.

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