The Residence Nil-Rate Band Taper 2026/27: A Worked Example for a £2.2m Estate
The Residence Nil-Rate Band of £175,000 tapers away by £1 for every £2 an estate exceeds £2,000,000, disappearing entirely above £2,350,000. Full worked example for a £2.2 million estate in 2026/27.
Why the Residence Nil-Rate Band exists — and why it tapers
The Residence Nil-Rate Band (RNRB) provides up to £175,000 of additional Inheritance Tax-free allowance, on top of the standard £325,000 nil-rate band, when a qualifying home passes to direct descendants (children, grandchildren, and so on) on death. It was introduced to help protect family homes from Inheritance Tax as property values rose — but it deliberately tapers away for the largest estates, on the basis that very wealthy estates need less help protecting the family home specifically.
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Once the deceased's total estate value exceeds £2,000,000, the Residence Nil-Rate Band reduces by £1 for every £2 of value above that threshold. Because the full RNRB is £175,000, it is completely tapered away once the estate reaches £2,350,000 (£175,000 × 2 = £350,000 range above the £2,000,000 threshold).
Worked example: a £2.2 million estate
Someone dies leaving an estate worth £2,200,000, including a qualifying family home passing to their children.
- Excess above the £2,000,000 threshold: £2,200,000 − £2,000,000 = £200,000
- Taper reduction: £200,000 ÷ 2 = £100,000
- Residence Nil-Rate Band after taper: £175,000 − £100,000 = £75,000
Combined with the full standard nil-rate band (unaffected by the taper):
- Total tax-free allowance: £325,000 (standard) + £75,000 (tapered RNRB) = £400,000
- Taxable estate: £2,200,000 − £400,000 = £1,800,000
- Inheritance Tax at 40%: £1,800,000 × 40% = £720,000
For comparison, without any taper (if the estate were, say, £1,900,000, safely under the £2,000,000 threshold): the full £175,000 RNRB would apply, giving £500,000 total tax-free allowance instead of £400,000 — a difference of £100,000 of allowance, worth £40,000 of Inheritance Tax at the 40% rate.
Married couples: a combined allowance, still subject to the taper
A surviving spouse or civil partner can inherit their late partner's unused Residence Nil-Rate Band, potentially giving a combined allowance of up to £350,000 (two lots of £175,000) available against the second death. However, the taper test on the second death is applied against the value of that second estate — so a very large combined estate can still see this doubled allowance reduced or eliminated, exactly as a single £175,000 allowance would be for a smaller estate crossing the same thresholds.
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The Residence Nil-Rate Band taper is a genuinely significant factor for estates between £2,000,000 and £2,350,000 — within that £350,000 band, every additional £2 of estate value costs £1 of tax-free allowance, on top of the standard 40% Inheritance Tax rate that then applies to a larger taxable estate. Anyone with an estate approaching £2,000,000, particularly where a family home is a substantial part of it, should consider professional estate planning advice well before this threshold becomes a live issue.
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Frequently asked questions
What is the Residence Nil-Rate Band taper threshold?
The Residence Nil-Rate Band starts tapering away once the deceased's total estate exceeds £2,000,000 in 2026/27, reducing by £1 for every £2 of estate value above that threshold.
At what estate value does the Residence Nil-Rate Band disappear completely?
The full £175,000 Residence Nil-Rate Band is completely tapered away once an estate reaches £2,350,000, since the £1-for-£2 taper removes the full £175,000 over a £350,000 range above the £2,000,000 threshold.
Does the standard nil-rate band also taper for large estates?
No — only the Residence Nil-Rate Band tapers. The standard £325,000 nil-rate band (and its transferable version between spouses) is unaffected by estate size and remains available in full regardless of how large the estate is.
Can a married couple use their combined Residence Nil-Rate Bands to reduce the taper impact?
Yes, to an extent — a surviving spouse can inherit their late spouse's unused Residence Nil-Rate Band, potentially giving a combined band of up to £350,000 on the second death, but the taper is assessed against the estate value on that second death, so a very large combined estate can still see this combined allowance tapered or lost.
Are lifetime gifts included when testing against the £2,000,000 threshold?
The taper test is based on the value of the estate immediately before death, which can include certain lifetime transfers that fail to become fully exempt (failed Potentially Exempt Transfers), so large gifts made within 7 years of death can potentially push an estate over the threshold even though the assets themselves were given away.
Can anything be done to avoid losing the Residence Nil-Rate Band to the taper?
Lifetime gifting (subject to the 7-year Potentially Exempt Transfer rules), charitable giving, and other estate planning approaches can sometimes reduce an estate below the £2,000,000 taper threshold, but the right strategy depends heavily on individual circumstances and professional advice is strongly recommended for estates near this threshold.
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