Glossary · UK
What is Downsizing Addition (RNRB)?
A mechanism allowing the Residence Nil Rate Band to still be claimed on an estate where the deceased sold, gave away, or downsized from their home before death, provided assets of equivalent value pass to direct descendants.
Full Definition
The downsizing addition preserves access to the Residence Nil Rate Band (RNRB) for an estate where the deceased no longer owned a qualifying home at the date of death, because they sold it, gifted it, or moved to a smaller property (or into care) at some point on or after 8 July 2015 -- the date the RNRB policy was announced, chosen specifically so people would not be penalised in advance for downsizing decisions made before the relief formally existed in April 2017. Without this addition, someone who sensibly downsized to release equity for retirement or care costs, or who moved into a care home and later sold their former home, could lose the RNRB entirely simply because they no longer held a qualifying residential property when they died. The downsizing addition works by calculating the amount of RNRB that would have been available had the deceased kept the original, more valuable home, then applying that "lost" RNRB (up to the value of other assets in the estate passing to direct descendants) as an addition to the estate's available nil rate bands, provided the eventual estate does still leave assets of at least equivalent value to direct descendants -- children, stepchildren, adopted children, or grandchildren. Worked example: a widow who owned a £500,000 home, sold it, and moved into a £150,000 retirement flat before dying with an estate leaving all assets to her children could claim a downsizing addition reflecting the RNRB that would have applied to the original £500,000 home, topping up the RNRB actually available on the smaller flat, subject to the normal RNRB taper for estates over £2 million. Claiming the downsizing addition requires a formal claim on the Inheritance Tax return within two years of the end of the month of death (or such longer period as HMRC allows), and the calculation can be complex where there were multiple downsizing moves, part-disposals, or a mix of gifts and sales -- executors dealing with an estate involving a downsizing move should identify the date and value of the former home carefully, since the addition is calculated by reference to the RNRB rules and property value that applied at the time of the downsizing move, not at the date of death.