UK Inheritance Tax Residence Nil Rate Band 2026/27: Extra 175,000 pounds Explained
The Residence Nil Rate Band adds up to 175,000 pounds to your IHT-free threshold when leaving your home to direct descendants. Full guide for 2026/27 with taper rules.
What Is the Residence Nil Rate Band?
Inheritance Tax (IHT) in the UK is charged at 40% on estates above the nil-rate band (NRB). The standard NRB has been £325,000 since 2009/10 and is frozen at that level until at least 2030.
The Residence Nil Rate Band (RNRB) was introduced in April 2017 as an additional IHT-free allowance for people who leave their home to direct descendants. It reached its maximum value of £175,000 in April 2020 and has remained at that level since, also frozen until 2030.
Together, these two allowances mean a single person can pass on up to £500,000 free of IHT -- or up to £1,000,000 for a married couple or civil partnership -- provided the conditions are met.
The 2026/27 Numbers
| Allowance | Per Individual | For Married Couple/Civil Partnership |
|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | £650,000 |
| Residence Nil-Rate Band (RNRB) | £175,000 | £350,000 |
| Maximum IHT-free total | £500,000 | £1,000,000 |
IHT rate above the threshold: 40%
A reduced rate of 36% applies if at least 10% of the net estate is left to charity.
Conditions for Claiming the RNRB
The RNRB does not apply automatically to every estate. The following conditions must be met:
1. You Must Own a Qualifying Residence
A qualifying residence is a residential property that the deceased owned and lived in at some point. It does not need to be the main home at the time of death -- it can be any property that was once used as a home.
Buy-to-let properties where the owner never lived are not qualifying residences. Commercial property does not qualify. The residence must be a real home that was actually occupied.
2. It Must Be Left to Direct Descendants
Direct descendants include:
- Children (biological, adopted, or foster children)
- Stepchildren
- Grandchildren and remoter lineal descendants
- Spouses and civil partners of the above (in certain circumstances)
The property does not need to be left to a descendant outright. It can be left in trust, provided the trust is a qualifying interest in possession trust or a bereaved minor's trust or 18-to-25 trust.
3. The Estate Must Be Below the Taper Threshold
The RNRB begins to taper for estates with a net value above £2 million.
The Taper: Estates Over £2 Million
For every £2 of net estate above £2 million, the RNRB is reduced by £1.
| Net Estate Value | RNRB Available |
|---|---|
| Up to £2,000,000 | £175,000 (full) |
| £2,100,000 | £125,000 |
| £2,200,000 | £75,000 |
| £2,300,000 | £25,000 |
| £2,350,000 or above | £0 (fully withdrawn) |
The net estate value is the value of all assets after deducting liabilities (mortgages, debts) and any reliefs such as Business Property Relief (BPR) or Agricultural Property Relief (APR), but before deducting the nil-rate band.
This means that a couple with a combined estate of £2.5 million may lose some or all of the RNRB from both partners' estates, depending on how assets are structured and when each partner dies.
Transferable RNRB for Married Couples and Civil Partners
Like the standard NRB, the RNRB can be transferred between spouses and civil partners.
When the first partner dies, any unused RNRB percentage is noted and can be claimed on the second death. The percentage transferred is applied to the RNRB at the date of the second death.
How the Transfer Works
Scenario A -- No Property at First Death
John dies in 2018 with no qualifying residence. His estate passes entirely to his wife Mary. John used 0% of the RNRB. Mary can claim 100% of John's RNRB on her death, in addition to her own 100%.
On Mary's death in 2026/27: RNRB available = £175,000 (her own) + £175,000 (transferred from John) = £350,000
Combined with two NRBs: £325,000 + £325,000 + £350,000 = £1,000,000 IHT-free.
Scenario B -- Partial Use at First Death
Anne dies in 2020, leaving 25% of her estate (including a share of the family home worth £50,000 of a £200,000 total RNRB) to her son. She used 25% of the RNRB. On her husband David's death in 2026/27, the transferable percentage is 75%.
Transferred RNRB on David's death = 75% of £175,000 = £131,250
David's total RNRB = £175,000 + £131,250 = £306,250.
Downsizing Addition
One of the most valuable RNRB planning provisions is the downsizing addition. If the deceased downsized to a smaller property (or sold their home entirely) on or after 8 July 2015, they can still claim a portion of the RNRB -- provided they would have qualified for the full RNRB had they retained the larger property.
When Is the Downsizing Addition Relevant?
- The person sold a qualifying residence after 8 July 2015
- The former home was sold or given away (or the person moved to a smaller property)
- Assets of equivalent value to the lost RNRB were retained in the estate and left to direct descendants
This prevents people who move into a care home or downsize late in life from losing the RNRB simply because they no longer own a property worth £175,000 or more.
Reducing IHT Through Lifetime Planning
The RNRB and NRB are particularly valuable in conjunction with other IHT planning strategies:
Gifting Property Before Death
Gifts made more than 7 years before death are fully exempt from IHT. If you give away your home during your lifetime, there is no RNRB (because you no longer own a qualifying residence at death) -- but the value of the gift may be fully outside the estate if you survive 7 years.
Caution: giving away your home while continuing to live in it creates a Gift with Reservation of Benefit (GROB), which means the property stays in your estate for IHT purposes. To avoid this, you must pay a market rent to the new owners.
Business Property Relief and Agricultural Property Relief
BPR and APR can reduce the value of qualifying assets by 50% or 100%, but this reduction also reduces the net estate value, potentially bringing it below £2 million and restoring a full RNRB.
Pensions and IHT
Pension funds are currently outside the estate for IHT (though proposed changes from April 2027 could change this). This means pension savings can be left to heirs with no IHT, potentially allowing a couple to pass on £1 million IHT-free through the NRB and RNRB, with an additional unlimited pension fund.
Practical Example: Family Home Worth £400,000
David and Susan own a house worth £400,000 and other assets worth £700,000. Total estate = £1,100,000.
David dies first, leaving everything to Susan (spouse exemption applies -- no IHT).
On Susan's death, she leaves the house (£400,000) and remaining assets (£700,000) to their son.
Available allowances:
- Susan's NRB: £325,000
- Transferred NRB from David: £325,000
- Susan's RNRB: £175,000
- Transferred RNRB from David (he used 0%): £175,000
- Total IHT-free: £1,000,000
Estate value: £1,100,000
Taxable: £1,100,000 - £1,000,000 = £100,000
IHT at 40%: £40,000
Without the RNRB (using only both NRBs):
Taxable: £1,100,000 - £650,000 = £450,000
IHT at 40%: £180,000
The RNRB (used in full for both partners) saves £140,000 in IHT.
Summary
The Residence Nil Rate Band of £175,000 (frozen until 2030) gives married couples a combined IHT-free threshold of £1 million when leaving a qualifying home to direct descendants. The full RNRB is available for estates under £2 million, tapering to nil at £2,350,000. Unused RNRB transfers to a surviving spouse, and the downsizing addition protects those who have sold or moved from their home. Estate planning that combines the NRB, RNRB, pensions, and lifetime gifts can dramatically reduce the IHT burden for many families.
Frequently asked questions
What is the Residence Nil Rate Band for 2026/27?
The Residence Nil Rate Band (RNRB) is 175,000 pounds per individual for 2026/27. It is an additional IHT-free allowance that applies when you leave a qualifying residence to direct descendants such as children or grandchildren.
Does the RNRB taper away for larger estates?
Yes. The RNRB tapers away at a rate of 1 pound for every 2 pounds that the net estate value exceeds 2 million pounds. At a net estate of 2,350,000 pounds, the RNRB is fully withdrawn.
Can unused RNRB be transferred to a surviving spouse?
Yes. When the first spouse or civil partner dies, any unused percentage of RNRB can be transferred to the surviving spouse's estate. This is the case even if the first to die had no property at the time of death. The surviving spouse's estate can therefore benefit from up to 350,000 pounds of RNRB (100% of theirs plus up to 100% transferred).
In-depth guides
Related reading
Residence Nil Rate Band Downsizing Addition: How It Works 2026/27
How the residence nil rate band downsizing addition protects Inheritance Tax relief when someone sells or downsizes their home before death — the rules, worked example and claim process for 2026/27.
Residence Nil-Rate Band Explained: The 2026/27 Guide
How the GBP 175,000 residence nil-rate band works in 2026/27, who qualifies, the taper above GBP 2m, and how couples can pass on GBP 1m IHT-free.
Farmer Tax UK 2026/27: Farm Profit Averaging, AIA and the Real Bill on a Working Farm
Farming income swings wildly year to year with weather and commodity prices. Farm profit averaging, capital allowances on machinery, and the 2026 Agricultural Property Relief changes all shape a farmer's real tax position — full worked example inside.