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HMRC internal manual

Inheritance Tax Manual

Basic Principles: Introduction: General Overview

FA(No2)2015 (as amended by Sch15, FA2016) introduced an additional nil-rate band, known as the ‘residence nil-rate band’ (RNRB), available on deaths on or after 6 April 2017.

Broadly, RNRB will be available if a person’s estate includes their home (IHTM46031) and this is left to their children or other direct descendants. The legislation refers to property being ‘closely inherited’ (IHTM46013). The amount of RNRB available is limited to the value of the home that is left to the direct descendants.

Unlike transferable nil rate band (TNRB) (IHTM43000), the additional nil-rate band provided by RNRB is only applied against the estate on death. RNRB is not taken into account when working out the tax due on the value of chargeable lifetime transfers or failed potentially exempt transfers (IHTM04057), or in calculating the baseline amount for the reduced rate of IHT for charitable gifting (IHTM45009). However, RNRB does apply to the entire estate on death. It is not an exemption or relief on the home itself, but reduces the total inheritance tax charge on death.

The legislation makes provision for any unused RNRB to be transferred from a person’s estate to the estate of their spouse or civil partner. There are also provisions to ensure that an individual who might lose some entitlement to RNRB because they move to a less valuable home, or into a nursing or care home, are still able to qualify for RNRB if they leave other property to their direct descendants.

A calculator for working out the RNRB is available online at https://www.tax.service.gov.uk/calculate-additional-inheritance-tax-threshold