How downsizing, selling or gifting a home affects the residence nil rate band
Check if an estate can get the residence nil rate band (RNRB) when someone downsizes, gifts or sells their home before they die.
Overview
When someone has sold, given away or downsized to a less valuable home before they die, their estate may still be able to get residence nil rate band (RNRB) if they qualify for a downsizing addition. To qualify, all these conditions must apply:
 the person sold, gave away or downsized to a less valuable home, on or after 8 July 2015
 the former home would have qualified for the RNRB if they’d kept it until they died
 their direct descendants inherit at least some of the estate
This guide explains the basic rules of downsizing. You may want to get professional advise about working out the RNRB in more complex situation, for example, involving trusts.
The amount of the downsizing addition will usually be the same as the RNRB lost when the former home is no longer in the estate.
It will also depend on the value of the other assets left to direct descendants. The downsizing addition cannot be more than the maximum amount of RNRB available if the sale or downsizing had not happened.
The estate’s personal representative must make a claim for the downsizing addition within 2 years of the end of the month that the person dies. HMRC can extend this time limit in some circumstances.
You do not have to tell HMRC when the downsizing move, sale or gift of the former home happens. The estate’s personal representative makes a claim for RNRB and any downsizing addition when filling in the Inheritance Tax returns. You should keep the details of the move, gift or sale so that the estate’s personal representative can get that information when they make the claim.
You can only take one move, sale or other disposal of a former home into account for the downsizing addition. If the person that died downsized more than once, or sold or gave away more than one home between 8 July 2015 and the date they died, the estate’s personal representative can choose which to use to calculate the downsizing addition.
Working out the lost RNRB
There are 5 steps to working out how much RNRB has been lost.

Work out the RNRB that would have been available when the former home was sold or given away or when the move happened. This figure is made up of the maximum RNRB due at that date (or £100,000 if it was before 6 April 2017) and any transferred RNRB available when the person dies.

Divide the value of the former home at the date of the move or when it was sold or given away by the figure in step 1, and multiply the result by 100 to get a percentage. If the value of the former home is greater than the figure in step 1 the percentage will be limited to 100%. If the value of the home sold is less than the figure in step 1, the percentage will be between 0% and 100%.

If there’s a home in the estate, divide the value of the home by the RNRB that would be available at the date the person dies (including any transferred RNRB). Multiply the result by 100 to get a percentage (again this percentage cannot be more than 100%). If there’s no home in the estate at the time the person dies this percentage will be 0%.

Deduct the percentage in step 3 from the percentage in step 2.

Multiply the RNRB that would be available at the time the person died by the figure from step 4. This gives the amount of the lost RNRB.
Example
A widow sold a home worth £195,000 in June 2018. The maximum RNRB when she sold the home (in the tax year 2018 to 2019) is £125,000.
She died in August 2020 with no home in her estate. The maximum RNRB in the tax year 2020 to 2021 is £175,000.
Her estate is also entitled to the transferred RNRB of £175,000 from her late husband’s estate.
To calculate the lost RNRB:

The maximum RNRB when the home was sold was £125,000. Her estate is also entitled to the transferred RNRB of £175,000. So the total RNRB that could have been available when the home was sold is £300,000 (£125,000 + £175,000).

When sold, the home was worth £195,000. Divide this by the value at step 1 (£300,000) to give a percentage of 65%.

There’s no home in the estate when she dies, so the percentage is 0%.

Taking 0% from 65% gives a percentage of 65%.

When she dies, the maximum RNRB is £175,000. Her estate is also entitled to the transferred RNRB of £175,000, so the maximum RNRB for her estate is £350,000. The ‘lost’ RNRB is £227,500 (65% of £350,000).
Although the lost RNRB is £227,500, the amount of the downsizing addition available to her estate depends on the value of any other assets she leaves to her direct descendants.
The effect of step 3 is that there’ll be a different amount of lost RNRB depending on whether the person that’s died has either:
 downsized to a less valuable home
 sold or given away a home
If the percentage in step 3 is the same or greater than the percentage in step 2, there’s no loss of RNRB and there’ll be no downsizing addition.
Downsizing to a less valuable home
There may be some lost RNRB when someone downsizes to a less valuable home but still has a home in their estate when they die. This will only happen when the value of the new home is less than the maximum RNRB available to the estate.
The downsizing rules will not apply if either:
 there’s no loss of the RNRB because the value of any new home is the same, or more than the maximum available RNRB when they die
 the RNRB is not available because although there’s a home in the estate it’s not left to a direct descendant
To see if the downsizing addition applies, you do not just look at whether the estate qualifies for the maximum RNRB. Instead you have to work out whether the value of any home still in the estate is too low to qualify for the maximum RNRB if it was left to direct descendants.
Example
A woman downsized in 2018 from a house worth £450,000 to a bungalow. The maximum RNRB in the tax year 2018 to 2019 is £125,000.
The woman dies in the tax year 2020 to 2021 when her estate is worth £700,000. She leaves the bungalow worth £200,000 to her sister.
She leaves other assets worth £500,000 to her children.
The maximum RNRB in the tax year 2020 to 2021 is £175,000.
There’s no entitlement to the transferred RNRB when she dies.

The maximum RNRB when the house was sold was £125,000.

The house was worth £450,000 when she sold it. Divide this by the figure at step 1 to give a percentage of 360%. As the value of the house is more than the figure at step 1, the percentage is limited to 100%.

When she died, the bungalow was worth £200,000. Divide this by the maximum RNRB available at death (£175,000). This would be 114.3%, but again is limited to 100%.

Take away the percentage at step 3 (100%) from the percentage at step 2 (100%). This gives a percentage of 0%.

Multiply the maximum RNRB (£175,000) by the percentage at step 4 (0%), to give a total of lost RNRB of £0.
As the percentage at step 4 is 0%, there’s no lost RNRB and so there’s no downsizing addition.
Calculating the RNRB
When someone downsized and still had a home when they died, the RNRB for the estate will be made up of both:
 the RNRB on the home included in the estate
 any downsizing addition due for the former home
The downsizing addition will usually be the lower of:
 the amount of RNRB lost as a result of the downsizing move
 the value of the other assets in the estate left to direct descendants
Example
In May 2018 a man downsized from a large house worth £500,000 to a small flat. The maximum RNRB in the tax year 2018 to 2019 is £125,000.
The man dies in September 2020. He leaves the flat worth £105,000 to his son, and the rest of his estate worth £200,000 to his 2 daughters.
The maximum RNRB in the tax year 2020 to 2021 is £175,000.
There’s no entitlement to the transferred RNRB when he dies.

The maximum RNRB when he downsized was £125,000.

The house was worth £500,000 when he sold it. Divide this by the figure at step 1, but limit the percentage to 100%.

The flat is worth £105,000 when he dies. Divide this by the maximum RNRB available at that time (£175,000). This gives a percentage of 60%.

Take away the percentage at step 3 (60%) from the percentage at step 2 (100%) to give a percentage of 40%.

Multiply the maximum RNRB when he dies (£175,000) by the percentage at step 4 (40%) to give a total of lost RNRB of £70,000.
The actual amount of the downsizing addition depends on the value of other assets left to his children.
As he leaves more than £70,000 worth of other assets to his daughters, the downsizing addition of £70,000 is added to the RNRB due for the flat of £105,000 left to his son. This gives a total RNRB for the estate of £175,000.
If instead he’d left the flat to his son, some assets worth £50,000 to his daughters, and the rest of his estate to his wife, the downsizing addition would be restricted to £50,000. This is because that’s the value of other assets he left to his daughters.
The total RNRB in that case would be £155,000 (£105,000 + £50,000).
Leaving part of the home to direct descendants
If only part of the home in the estate is left to direct descendants, you use the value of that part to work out the RNRB. This may also affect the total RNRB for the estate in downsizing situations.
Example
A man downsized in February 2019 from a house worth £400,000 to a bungalow. The maximum RNRB in the tax year 2018 to 2019 is £125,000.
When he dies in September 2020, he leaves the bungalow, worth £105,000, in equal shares to his wife and son.
He leaves the other assets in his estate worth £150,000 to his daughter.
The maximum RNRB in the tax year 2020 to 2021 is £175,000.
There’s no entitlement to the transferred RNRB when he dies.

The maximum RNRB at the date of downsizing was £125,000.

When sold, the house was worth £400,000. Divide this by the figure at step 1, but limit the percentage to 100%.

When he dies, the bungalow is worth £105,000. Divide this by the maximum RNRB available at that time (£175,000). This gives a percentage of 60%.

Take away the percentage at step 3 (60%) from the percentage at step 2 (100%). This gives a percentage of 40%.

Multiply the maximum RNRB (£175,000) by the percentage at step 4 (40%), to give a total of lost RNRB of £70,000.
The man only leaves half of the bungalow to his son. So you reduce the RNRB due for that home to £52,500 (50% of £105,000).
As he leaves other assets of £150,000 to his daughter, the downsizing addition is £70,000 (the lower of the lost RNRB of £70,000 and £150,000).
You add this to the RNRB due for the bungalow of £52,500, to give a total of £122,500 (£52,500 + £70,000).
The maximum available RNRB is £175,000, but his estate can only use £122,500. So there’s unused RNRB of £52,500 that can be transferred to his wife’s estate.
If the assets left to his daughter were worth only £20,000, the downsizing addition would be restricted to £20,000. So the total RNRB for the estate would be £72,500 (£52,500 + £20,000).
In that case, there’d be unused RNRB of £102,500 available for transfer.
Downsizing before 6 April 2017
Where the downsizing occurs on or after 8 July 2015, but before 6 April 2017, you treat the maximum available RNRB at that time as £100,000.
Example
A husband and wife downsized to an apartment in March 2016 from a house they owned jointly, worth £300,000. As the move happened before 6 April 2017 you treat the maximum RNRB in March 2016 as £100,000.
When his wife dies in December 2019, she leaves her half share of the apartment, worth £105,000, to her husband. She leaves other assets in her estate worth £80,000 to their daughter.
The maximum RNRB in the tax year 2019 to 2020 is £150,000.
There’s no entitlement to the transferred RNRB when she dies.

The maximum RNRB at the date of sale is £100,000 because the downsizing happened before 6 April 2017.

When sold, his wife’s share of the house was worth £150,000. Divide this by the figure at step 1, but limit the percentage to 100%.

The apartment is worth £105,000 when his wife dies. Divide this by the maximum RNRB at that time (£150,000) to give a percentage of 70%.

Take away the percentage at step 3 (70%) from the percentage at step 2 (100%) to give a percentage of 30%.

Multiply the maximum RNRB (£150,000) by the percentage at step 4 (30%) to give a total of lost RNRB of £45,000.
Because the apartment was left to her husband there’s no RNRB due for the share in that home.
The downsizing addition is the lower of the lost RNRB (£45,000) or the amount of other assets left to their daughter (£80,000). So the downsizing addition is £45,000 in this case.
The total RNRB for the estate is £45,000 due to the downsizing addition.
The wife’s estate had a maximum available RNRB of £150,000, but it can only use £45,000. So there’s unused RNRB of £105,000 that can be transferred to the husband’s estate.
If the value of the assets left to their daughter had only been £10,000, the downsizing addition would be reduced to £10,000. So the total RNRB for the estate would be £10,000. In that case the unused amount available for transfer would be £140,000.
Selling or giving away a home
When someone sells or gives away (disposes of) a former home so that there’s no longer any home in their estate when they die, the RNRB for the estate will be equal to the downsizing addition for the former home.
If someone downsized but had never lived in the less valuable property, that property is not a home for additional threshold purpose. This means that the position is the same as if the former home had been sold or given away.
You calculate the downsizing allowance in these situations slightly differently because there’s no home in the estate that could qualify for any RNRB.
When you work out the lost RNRB, the percentage at step 3 will always be 0% and the result at step 4 will always be the same as the figure at step 2. So, you can miss out steps 3 and 4.
The amount of lost RNRB will depend on what the former property was worth, and the maximum RNRB at the time of the disposal. Again, if the sale took place on or after 8 July 2015 but before 6 April 2017, you treat the maximum RNRB available as £100,000.
Homes worth more than the RNRB
If the value of the former home is the same or more than the maximum available RNRB at the time of the disposal, you treat the lost RNRB as 100% of the maximum RNRB available when the person died.
When there’s no home in the estate, the downsizing addition will be the lower of:
 the amount of RNRB lost as a result of the sale
 the value of the other assets in the estate that the direct descendants inherit
Example
A woman sold her home for £285,000 in October 2018 to go into residential care.
The maximum RNRB in the tax year 2018 to 2019 is £125,000.
She dies in March 2021 with an estate worth £500,000.
She leaves half of her estate to her son and half to her nephew.
The maximum RNRB in the tax year 2020 to 2021 is £175,000.
There’s no entitlement to the transferred RNRB when she dies.

The maximum RNRB at the date of sale was £125,000.

The house was sold for £285,000. Divide this by the figure at step 1, but limit the percentage to 100%.

There’s no home in the estate so the percentage here is 0%.

Take away the percentage at step 3 (0%) from the percentage at step 2 (100%). The percentage at step 2 stays at 100%.

Multiply the maximum RNRB (£175,000) by 100%, so the total lost RNRB is £175,000.
The value of the home at the time of the sale is more than the maximum RNRB at that time so the whole of the RNRB has been lost.
Before she downsized, the woman’s estate could have qualified for the maximum RNRB at that time. So, when she dies, the lost RNRB as a result of the downsizing is £175,000.
The downsizing addition is the lower of the value of other assets that are left to a direct descendant and the lost RNRB.
As she leaves £250,000 of other assets to her son, a downsizing addition of £175,000 is due.
If instead she’d only left £100,000 to her son and the rest of her estate to her nephew, the downsizing addition would be restricted to £100,000.
Homes worth less than the RNRB
If the value of the home in the person’s estate was less than the maximum RNRB when they sold or gave it away, the lost RNRB is worked out as a percentage of that maximum RNRB. You then apply that percentage to the maximum RNRB when the person dies.
Example
A man had a flat that he sold for £90,000 in May 2019. He moved in with his daughter. The maximum RNRB in the tax year 2019 to 2020 is £150,000.
The man dies in January 2021 with an estate worth £600,000. He leaves all of it to his daughter.
The maximum RNRB in the tax year 2020 to 2021 is £175,000.
There’s no entitlement to the transferred RNRB when he dies.

The maximum RNRB at the date of sale was £150,000.

The flat was worth £90,000 when he sold it. Divide this by the figure at step 1, to give a percentage of 60%.

There’s no home in the estate so the percentage here is 0%.

Take away the percentage at step 3 (0%) from the percentage at step 2 (60%). The percentage at step 2 is still 60%.

Multiply the maximum RNRB (£175,000) by 60%, so the total lost RNRB is £105,000.
The actual amount of the downsizing addition is the lower of the lost RNRB (£105,000) and the value of other assets left to a direct descendant.
As the man leaves £600,000 of other assets to his daughter, a downsizing addition of £105,000 is due.
Downsizing when there’s transferred RNRB
When transferring RNRB following the death of a husband, wife or civil partner, you calculate the downsizing allowance in the same way. The difference is that the maximum RNRB available at both the date someone dies and the date they sell or give away their home is increased to include the amount of the transferred RNRB.
Example
A woman sold her home for £285,000 in October 2018 to go into residential care. The maximum RNRB in the tax year 2018 to 2019 is £125,000.
She dies in March 2021 with an estate worth £500,000.
She leaves half of her estate to her son and half to her nephew. The maximum RNRB in the tax year 2020 to 2021 is £175,000.
The woman’s estate is entitled to the transferred RNRB of £175,000.

The maximum RNRB at the date of sale was £125,000. There’s also an entitlement to the transferred RNRB of £175,000. So the total value at step 1 is £300,000 (£125,000 + £175,000).

The house was sold for £285,000. Divide this by the figure at step 1 to give a percentage of 95%.

There’s no home in the estate when she dies so the percentage here is 0%.

Deduct the percentage at step 3 (0%) from the percentage at step 2 (95%). So the percentage at step 2 stays as 95%.

The maximum RNRB when she dies is £175,000. There’s also an entitlement to the transferred RNRB of £175,000, so the maximum for her estate is £350,000. Multiply this by 95% to give total lost RNRB of £332,500.
The actual amount of the downsizing addition is the lower of the value of other assets left to a direct descendant and the lost RNRB. As she left £250,000 of other assets to her son, her estate is due a downsizing addition of £250,000.
Downsizing and trusts
The downsizing rules apply where a person sells or gives away a home that’s included in their estate. Property held in certain trusts is included within a person’s estate for Inheritance Tax purposes and so the downsizing rules apply in these circumstances too.
When a home is held in such a trust, the trustees might be able to dispose of it or they may change it to a less valuable one. This is treated the same as if the person that died had downsized, sold or gave away the home themselves. Where a person’s right to occupy a home held in a trust stops, for example on remarriage, this is also treated as a disposal for the purposes of the downsizing rules.
A person can have more than one interest in the same home. For example, they may own half of a house outright while the other half is held in a trust for their benefit. These would be two separate interests in the same home.
If a person sells or gives away more than one interest in a single home at the same time, for example, because they sell the whole house, all those interests can be taken into account for downsizing purposes. However, if a person disposes of different interests at different times, the estate’s personal representative can only nominate one of those disposals to be taken into account to work out any downsizing addition.