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HMRC internal manual

Inheritance Tax Manual

RNRB: glossary of terms

Adjusted allowance (IHTM46025)

This is only relevant if the person’s estate exceeds the taper threshold. The adjusted allowance is the person’s default allowance less any reduction as a result of the estate exceeding the taper threshold.

 

Brought-forward allowance (IHTM46040)

This is the additional amount that is transferred from any pre-deceased spouse or civil partner’s estate which can increase a person’s residence nil-rate band. The brought-forward allowance is added to the residential enhancement at the person’s date of death to calculate their default allowance. The brought-forward allowance for a person can never be higher that the residential enhancement.

 

Carry-forward amount

This is the amount of any residence nil-rate band that was available to that person’s estate, but which had not actually been used. For example, if the person’s default allowance was £125,000 and a residence worth only £100,000 was closely inherited, the estate would have a carry-forward amount of £25,000.

 

Closely inherited (IHTM46013)

Property is closely inherited if it is inherited by a direct descendant.

 

Default allowance (IHTM46024)

This is the total of the residential enhancement at the date of death and the brought-forward allowance.

 

Direct descendant (IHTM46034)

This phrase is not used in the legislation. It is the shorthand term covering all the various type of people who can inherit property from the estate and trigger residence nil-rate band being due. These people are: Lineal descendants - children, grandchildren, great grandchildren, etc.

The spouse or civil partner of any lineal descendant. For these purposes a child of a person includes anyone who has been that person’s step-child, adopted child, foster child or a child for whom they have been appointed as legal or special guardian.

 

Downsizing addition (IHTM46050)

Where an estate does not qualify for the full residence nil-rate band because the value of the qualifying residential interest at the date of death is less that the default allowance or the adjusted allowance, the downsizing addition is the extra residence nil-rate band that the estate qualifies for if the person had downsized to a less valuable home, or had disposed of their home, before they died.

 

Lost relievable amount (IHTM46062)

In working out the amount of any downsizing addition it is necessary to work out the amount of residence nil-rate band that had potentially been lost by the downsizing or disposal. This is the lost relievable amount.

 

Person’s allowance on death (IHTM46062)

This is required to work out the lost relievable amount. If the estate on death is below the taper threshold then it is equal to the default allowance. If the estate on death exceeds the taper threshold then it equals the adjusted allowance.

 

Person’s former allowance (IHTM46062)

This is required to work out the lost relievable amount. The person’s former allowance is basically the residence nil-rate band they would have been entitled to at the point when they downsized or disposed of their home.

 

Qualifying former residential interest (IHTM46053)

In order for there to be any downsizing addition the person must have downsized from, or disposed of, a home that was a residential property interest. The residential property interest disposed of is called the qualifying former residential interest. If the person disposed of more than one residential property interest in their lifetime their executors have to choose which disposal is going to count as the qualifying former residential interest. – abbreviated as QFRI.

 

Qualifying residential Interest (IHTM46011)

This is a residential property interest that is in the person’s estate at their date of death. There can only ever be one qualifying residential interest for an estate. If the estate includes more than one residential property interest, the executors of the estate have to nominate which property they wish to treat as the qualifying residential interest. – abbreviated as QRI

 

Residence nil-rate amount

The legislation says that, if the conditions are satisfied, an estate can qualify for an increased nil-rate band. The amount of this extra nil-rate band is equal to the residence nil-rate amount. The residence nil-rate amount is therefore the value which comes out of the calculations and is largely interchangeable with the residence nil-rate band.

 

Residence nil-rate band (IHTM46001)

This is the total additional nil rate band, or tax free amount that applies on the individual estate. – abbreviated as RNRB

 

Residential enhancement (IHTM46022)

This is the figure which sets the maximum available residence nil-rate band for each year. That is £100,000 for 2017-18, £125,000 for 2018-19, £150,000 for 2019-20 and £175,000 for 2020-21. This value is scheduled to increase in line with the Consumer Prices Index (CPI) after 2020-21.

 

Residential property interest (IHTM46011)

This is any property that has ever been the person’s home that is in their estate.

 

Taper threshold (IHTM46023)

This is the level above which the residence nil-rate band starts to be reduced. The level is set at £2million for the period from 6 April 2017 until 5 April 2021. It is scheduled to increase in line with the Consumer Prices Index (CPI) from 6 April 2021. The available RNRB is reduced by £1 for every £2 that the estate exceeds the taper threshold.