How does the residence nil-rate band taper for estates over £2 million?

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The residence nil-rate band (RNRB) provides valuable extra Inheritance Tax relief when a main home is left to direct descendants, but this additional relief is specifically clawed back for larger estates through a taper that many people are unaware of until it affects them. **What the RNRB normally provides** The RNRB is an extra Inheritance Tax-free amount (up to £175,000 for 2026/27, on top of the standard £325,000 nil-rate band) available when a main residence is left to children, grandchildren, or other direct descendants. Combined with the standard nil-rate band, and assuming both are unused and available, a married couple's combined estate could in principle shelter up to £1 million (2 x £325,000 nil-rate band plus 2 x £175,000 RNRB) from Inheritance Tax on the second death, if both spouses' full allowances transfer and are used. **The £2 million taper threshold** However, the RNRB tapers away for estates valued above £2 million (based on the value of the estate immediately before death, before deducting any reliefs like spouse exemption or business relief, in most cases). For every £2 that the estate exceeds £2 million, the available RNRB reduces by £1. This means the RNRB is reduced to zero entirely once the estate reaches £2.35 million (£175,000 x 2 = £350,000 of excess needed to wipe out the full £175,000 relief, so £2,000,000 + £350,000 = £2,350,000). **Worked example** An estate is valued at £2.2 million, £200,000 over the £2 million taper threshold. The RNRB reduces by £1 for every £2 of that £200,000 excess: £200,000 / 2 = £100,000 reduction. So instead of the full £175,000 RNRB, only £75,000 (£175,000 − £100,000) remains available, assuming the home is left to direct descendants and other RNRB conditions are met. **Worked example: fully tapered away** An estate valued at £2.4 million exceeds the £2 million threshold by £400,000. Applying the taper: £400,000 / 2 = £200,000 reduction -- but since this exceeds the maximum £175,000 RNRB available in the first place, the RNRB is reduced to £0 entirely. This estate only benefits from the standard £325,000 nil-rate band (plus any transferred unused nil-rate band from a predeceased spouse), with no RNRB relief at all, regardless of whether the home passes to children. **Why this creates a planning consideration** Because the taper is based on the GROSS estate value (broadly, before reliefs like spouse exemption reduce the taxable amount, though the precise interaction depends on estate structure), some high-net-worth individuals consider lifetime gifting, trust planning, or charitable giving strategies specifically to bring the estate value back below the £2 million taper threshold, preserving some or all of the RNRB that would otherwise be lost -- though any such planning needs to be considered well in advance (given the 7-year rule for gifts) and should account for the individual's own income and capital needs during their remaining lifetime, not undertaken purely to chase a tax saving. **Married couples and transferability** Because unused nil-rate band and RNRB can transfer between spouses/civil partners on the first death (provided a claim is made), the £2 million taper threshold and the available RNRB are usually assessed on the SECOND death for a married couple, using the combined value of both estates' allowances -- meaning the effective taper threshold before RNRB starts being lost can be higher for a couple's combined estate than for a single individual, but the same £1-for-every-£2-over-£2-million mechanism applies to the calculation.

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