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HMRC internal manual

Inheritance Tax Manual

More detailed guidance: inherited

For RNRB purposes, a residence will be inherited by direct descendants if there has been a disposition of the property arising on death. This means that there has been a change in the beneficial ownership from the deceased to the ‘direct descendant’ of the deceased, whether that is effected by will, under the law relating to intestacy, or otherwise.

‘Or otherwise’ means property that might pass by application of rules relating to survivorship, forced heirship, nomination, under a donatio mortis causa, or through any other means on the death. 

The residence does not need to be left to the direct descendant as a specific legacy and does not need to be mentioned specifically in a will; for example, it can be inherited as part of the residue of the estate.

Example 1

The deceased leaves £500,000 to his spouse on life interest trusts, and the residue of his estate (including a residential property interest) to his children. The residential property interest will be closely inherited as it passes directly to his children on his death.

Settled property

Direct descendants will only be treated as inheriting the property if they become entitled to it on the death of the deceased and the property immediately becomes comprised in their estate for IHT purposes. For example, if the will has a condition that the deceased’s grandchildren have to reach a certain age before they can inherit the residence, which means the property is held in a trust subject to a contingency, the RNRB would not apply because the grandchildren do not inherit the residence on the death of their grandparent. If the residence is held in trust before the death, the residence will only qualify for the RNRB if it becomes part of the direct descendant’s estate for IHT purposes following the death.

Sale of the residence post-death

The actual residence does not have to end up in the hands of the deceased’s direct descendants. An estate could still be eligible for the RNRB if the deceased’s personal representatives sell the residence as part of the administration of the estate and pass the sale proceeds to the direct descendants.

Equally a gift in the deceased’s will directing the personal representatives to sell the deceased’s residence with the sale proceeds being paid to a direct descendant would be treated as the residence being closely inherited.

Once the direct descendants have inherited the residence, there are no restrictions on what they have to do with it. An estate will still qualify for the RNRB even if the direct descendants decide to sell the residence after they have inherited it.

Example 2

Greta dies in 2019-20 leaving her house, valued at £500,000, to her three grandchildren as part of the residue of her estate. The three grandchildren do not wish to retain the property jointly, so Greta’s personal representatives sell the property and distribute the sale proceeds between the three grandchildren. The maximum available RNRB in 2019-20 is £150,000.

As the residence passes to the grandchildren under the terms of Greta’s will, RNRB of £150,000 will be available. The fact that the residence is sold as part of the administration of the estate does not affect the availability of RNRB.


Appropriation of property by the personal representatives (PRs) under the administrative powers given expressly under the will, or by Section 41, Administration of Estates Act 1925, during the administration of an estate is, as it says, an administrative power used by the PRs in the execution of their duties. An appropriation is not a disposition. An appropriation would, therefore, not make the RNRB available if the residential property was not left to qualifying beneficiaries and so was not closely inherited on death.

Example 3

The deceased’s estate includes a residential property interest. Under his will he leaves half his estate on life interest trusts to his mother, and the other half to his son. As the residential property interest passes into residue, only a half share is closely inherited. Using their administrative powers, the PRs appropriate the residential property interest to the son in satisfaction of his half share of the estate. Although the whole property now passes to the son, it did so by virtue of the PRs administrative powers, not directly under the terms of the will. It remains the case that only a half share of the residential property interest is closely inherited.

Deeds of variation

The residence can also be inherited by a direct descendant if it is left to them as a result of amending the deceased’s will by a Deed of Variation within IHTA1984/S142 (IHTM35000). The Deed of Variation has the effect, for inheritance tax purposes, of altering the disposition of the estate on death, so the effect of the Deed has to be taken into account as though it took effect on the death.

S144 Appointments

Where an appointment is made under IHTA84/S144, the effect of the provisions is that the property is treated as if the deceased’s will had provided that the property passes according to the appointment. This means that an appointment to a direct descendant would be treated as though that direct descendant had inherited the property on the death.

Inheritance (Provisions for Family and Dependants) Act 1975

Where an order is made under the Inheritance (Provisions for Family and Dependants) Act 1975 that satisfies IHTA1984/S146, the Inheritance Tax Act treats the devolution of the deceased’s estate as though the provisions of the order had applied on death. This means that to determine whether property is closely inherited on the deceased’s death, the effects of any order under the Inheritance (Provisions for Family and Dependants) Act 1975 have to be taken into account.