The Inheritance Tax residence nil rate band (RNRB)

Tax payers will soon have a new tax relief that will reduce future inheritance tax (IHT) – the inheritance tax residence nil rate band (RNRB). It will gradually be phased in from 6 April 2017 and will reduce IHT bills for estates which include a property that was occupied as a home by the deceased, which is passed on death to a direct descendant.

It will also apply where the estate includes money from the sale of the deceased’s home during their lifetime. The starting amount of the RNRB will be £100,000. It then increases annually by £25,000 so that by 6 April 2020 it will be £175,000.

Who qualifies as a direct descendant?

The residence nil rate band can only apply where the deceased’s home, or money derived from the sale of it, in passed on death to a direct descendant. For this purpose, a direct descendant is:

  • a child, grandchild or other lineal descendant of that person
  • a spouse or civil partner of a lineal descendant (including their widow, widower or surviving civil partner)

A child means:

  • 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.

In this context, the child who inherits the home doesn’t have to be under 18. A person’s step-child is limited to someone whose parent is, or was, the spouse or civil partner of that person.
Direct descendants don’t include nephews, nieces, siblings and other relatives who aren’t included in the list above.

Other conditions

The full amount of RNRB (and transferable RNRB) is only allowed for transfers on death where the net value of the estate is worth less than £2 million. It’s scaled back for estates over £2 million. RNRB can also be claimed where the deceased sold their home and retained some or all the proceeds in their estate at the time of death.

Unused RNRB

Like the IHT general nil rate band, amounts unused by the first spouse to die will be available to use against the surviving spouse’s estate. The transferable amount is worked out as a percentage of the maximum RNRB on the first death. The percentage is used to calculate the transferable RNRB at the time of the second spouse’s death.


In May 2017 Peter dies and is survived by his wife, Jane. They jointly owned and lived in a house worth £700,000 at Peter’s death. Peter left his whole estate to Jane, which is an exempt transfer for IHT purposes, and therefore Peter used none of his RNRB. In 2022 Jane dies and leaves the house (now worth £850,000) to her children and grandchildren. Her estate is entitled to £175,000 RNRB, plus Peter’s unused RNRB. The transferable amount is 100% of the amount at the time of Jane’s death (not Peter’s), i.e. another £175,000. Therefore, up to £350,000 of Jane’s estate in respect of her home is charged at 0% IHT. Note that the RNRB has no effect on the general nil rate band.

Obtaining the Transferable RNRB

The RNRB doesn’t require a special claim and executors should automatically take it into account when they complete the IHT forms for an estate. However, the transferable RNRB must be claimed. Usually this would be done when completing the IHT forms, but a claim can be made at any time up to two years from the end of the month following the deceased’s death.

Where one spouse dies and their estate doesn’t use their RNRB, it can be used against their spouse’s estate. To obtain this so-called transferable RNRB, a claim doesn’t need to be made until the second spouse dies. The transferable RNRB can be claimed even where the first spouse died before 6 April 2017.


Peter died in 2014 leaving everything to his wife Jane, who dies in 2021. Because her estate qualifies for RNRB of £175,000, the executors can claim £175,000 transferable RNRB in respect of Peter’s estate.

Christian Elmes, Partner

Christian Elmes trained at PwC and qualified as a chartered accountant in 1999, before moving to Morgan Stanley (2000-2002) as Associate in the Investment Banking Division (IBD).

He was appointed Director of Finance, Teather & Greenwood Investment Management in 2002 and moved with the Tax Efficient Solutions team to Smith & Williamson in 2004, becoming Deputy head of the department. He left to co-found Enterprise in 2011.

Over the last ten years, Christian has been responsible for developing a number of tax efficient products, particularly Enterprise Investment Schemes (EIS). He is able to lead on tax efficient product development from inception through to completion, because of his financial and tax background and commercial experience.

Christian is competent across a broad range of sectors including, leisure and hospitality, media, property and renewable energy.

Christian is a non-executive board member to a number of leisure and hospitality companies, Casper & Cole Ltd, Wright & Bell Ltd, Ruth & Robinson Ltd, Camm & Hooper Ltd and Darwin & Wallace Ltd.

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