UK Inheritance Tax Residence Nil Rate Band 2026/27: The Extra £175,000 Explained
The residence nil rate band (RNRB) is an additional £175,000 of inheritance tax exemption available when you leave a qualifying home to your children or grandchildren. Combined with the standard nil rate band of £325,000, it allows individuals to pass up to £500,000 -- and married couples up to £1,000,000 -- free of IHT. But the rules are intricate, the taper above £2m catches many by surprise, and the freeze to 2030 means more families are affected each year.
The standard IHT nil rate band (NRB) of £325,000 has been frozen since 2009. By 2016 it was clear that rising house prices were pushing many middle-income families into inheritance tax -- not because of large investment portfolios or business assets, but simply because their home had increased in value. The residence nil rate band was introduced in April 2017 specifically to address this: it provides an additional tax-free band of up to £175,000 (phased in from £100,000 in 2017/18 to £175,000 in 2020/21) when a main residence is left to direct descendants.
Together with the standard NRB, an individual can pass up to £500,000 free of IHT in 2026/27, provided the estate includes a qualifying home and it passes to children or grandchildren. For a married couple where both NRBs and RNRBs are fully available, the combined threshold is £1,000,000.
However, the RNRB comes with conditions that the standard NRB does not. It can only be used against the value of a qualifying residential property (not other assets), the property must pass to direct descendants, and it is tapered away for estates above £2 million. Understanding these conditions is essential before assuming the full £175,000 applies to your estate.
The Four Conditions for RNRB
1. Qualifying residential property
The estate must include a property that was the deceased's home at some point during their ownership. Buy-to-let properties never lived in by the owner do not qualify.
2. Closely inherited by direct descendants
The property must pass to children, grandchildren, step-children, adopted children, or their spouses. Leaving it to siblings, nieces, or nephews does not qualify.
3. Net estate below £2 million
The full RNRB is only available if the net estate (after debts, before reliefs) is £2 million or less. Above this, the RNRB tapers at £1 for every £2 of excess.
4. Property value at least equal to RNRB
The RNRB can only be used against the value of the qualifying property. If the property is worth £120,000, only £120,000 of RNRB is available -- the remaining £55,000 cannot be applied to other assets (though it can be transferred to a surviving spouse).
The Taper Above £2 Million
The RNRB taper is one of the least-understood aspects of IHT planning and catches many families by surprise, particularly those with high-value properties in London and the South East.
Net estate value
RNRB available
Total IHT-free (with NRB)
Up to £2,000,000
£175,000 (full)
£500,000
£2,100,000
£125,000
£450,000
£2,200,000
£75,000
£400,000
£2,350,000+
£0 (fully tapered)
£325,000 only
The taper zone (£2m to £2.35m) is where estate planning can make a particularly large difference. Reducing estate value below £2m by, for example, making a gift of assets (subject to the 7-year rule) or redirecting investments into Business Property Relief-qualifying assets can restore £175,000 of RNRB and save £70,000 in IHT (£175,000 x 40%).
Downsizing Addition
Older homeowners who downsize to a smaller property or move into residential care may worry that they will lose the RNRB by no longer owning a home worth £175,000 or more. The downsizing addition addresses this.
If you sold or gave away a home on or after 8 July 2015 and the estate (including the proceeds from the sale or equivalent value assets) is left to direct descendants, you may be entitled to a downsizing addition that effectively preserves the RNRB that would have been available when the former home was sold. Your executors must claim the downsizing addition on the IHT return and provide evidence of the former home\'s value and date of sale.
This relief prevents the RNRB from discouraging downsizing -- a concern that arose when the RNRB was introduced, since linking the relief to property ownership might incentivise people to stay in large homes rather than moving to more suitable smaller properties.
Key IHT Facts at a Glance (2026/27)
Standard nil rate band (NRB)
£325,000 per person
Residence nil rate band (RNRB)
£175,000 per person
Combined IHT-free (individual)
£500,000 (with qualifying home)
Combined IHT-free (couple)
Up to £1,000,000
Taper starts
Net estate above £2,000,000
RNRB fully tapered at
Net estate £2,350,000+
IHT rate on excess
40% (36% if 10% to charity)
Thresholds frozen until
At least April 2030
Frequently Asked Questions
Frequently Asked Questions
What is the residence nil rate band (RNRB)?
The residence nil rate band (RNRB) is an additional inheritance tax threshold of £175,000 per person (frozen until at least April 2030) that applies when a qualifying residential property is left to direct descendants. It is added to the standard nil rate band (NRB) of £325,000, giving a total individual IHT-free threshold of £500,000, provided a home is included in the estate and passed to direct descendants. Married couples can transfer unused RNRB to the surviving spouse, potentially giving a combined threshold of £1,000,000.
Who counts as a direct descendant for RNRB purposes?
Direct descendants include children (including adopted children, step-children, and foster children), grandchildren, great-grandchildren, and their spouses and civil partners. A child's spouse or civil partner who has not remarried or entered a new civil partnership also counts. Nieces, nephews, siblings, and other relatives do not qualify. If you leave your home to a trust for children, it may or may not qualify depending on the type of trust -- bare trusts and some interest-in-possession trusts do qualify, but discretionary trusts do not unless the beneficiaries include only direct descendants.
What is the qualifying residential property for RNRB?
The RNRB requires the estate to include a qualifying residential property -- a property that was the deceased's home at some point and is being closely inherited (left to direct descendants). Buy-to-let properties that were never the deceased's home do not qualify. If the deceased lived in rented accommodation at death but previously owned a home and downsized (selling before death), the downsizing addition may apply instead.
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How does the RNRB taper above £2 million work?
The RNRB is tapered away for estates with a net value above £2 million. For every £2 of estate value above £2 million, £1 of RNRB is lost. An estate of £2.35 million would lose £175,000 of RNRB entirely (£350,000 excess / 2 = £175,000). At £2,350,000 net estate value, no RNRB is available. The taper applies to net estate value (after deducting debts and funeral expenses) before any reliefs like Business Property Relief or Agricultural Property Relief.
Can I transfer unused RNRB to my spouse?
Yes. Any unused RNRB from a predeceasing spouse or civil partner can be transferred to the surviving spouse's estate, in the same way as the standard NRB is transferred. If the first spouse to die did not use any RNRB (for example because they left everything to the surviving spouse using the spouse exemption), 100% of the RNRB can be transferred. The transferred RNRB is calculated as a percentage of the current RNRB at the time of the survivor's death. This is why married couples can potentially shelter up to £1,000,000 from IHT (£325,000 + £175,000 x 2).
What is the downsizing addition and how does it work?
The downsizing addition applies when a person sold or gave away a home on or after 8 July 2015, and the estate includes fewer assets qualifying for RNRB than the maximum available. The addition ensures that downsizing (to a smaller property or into rented accommodation) does not penalise people by losing RNRB that would otherwise have been available. The amount of downsizing addition is the difference between the RNRB that could have applied to the former property and the RNRB actually available on the estate at death, provided direct descendants inherit at least the equivalent value from the estate.
Does the RNRB apply if I leave the home in trust for grandchildren?
It depends on the type of trust. A bare trust (where the beneficiary has an absolute right to the property and income) counts as a direct inheritance and qualifies. An interest in possession trust where the beneficiary has the right to live in the property or receive income also qualifies in most cases. A discretionary trust (where trustees have discretion over who benefits and when) does not qualify for RNRB unless the only possible beneficiaries are direct descendants. Many estates use discretionary trusts for flexibility, losing RNRB as a result -- specialist advice is essential.
How does the standard nil rate band interact with the RNRB?
The standard nil rate band (NRB) of £325,000 is subtracted first from taxable estate value. The RNRB (up to £175,000) is then applied to reduce the taxable portion further. The NRB can be used against any assets in the estate; the RNRB can only be set against the value of the qualifying residential property (or, in cases of downsizing, against other assets). If the home is worth less than £175,000, only the actual property value can use the RNRB -- unused RNRB cannot be used against other assets.
Is the RNRB frozen and will it increase?
Yes. The RNRB was frozen at £175,000 in 2021/22 and the freeze has been extended to at least April 2030 under current government plans. The standard NRB of £325,000 is also frozen for the same period. In practice, frozen thresholds combined with rising property values mean that more estates are being dragged into IHT each year -- a phenomenon sometimes called "fiscal drag." Without proactive estate planning, families that would historically have been comfortably within the thresholds now face IHT bills.
When does RNRB planning make sense?
RNRB planning is most valuable for estates between £500,000 and £2,350,000 (per individual) or £1,000,000 to £4,700,000 for couples. Below £500,000 (per person), the combined NRB and RNRB already shelters the estate. Above £4,700,000, neither partner has any RNRB (fully tapered). The taper zone (£2m to £2.35m per person) is where structuring can make the biggest difference -- reducing estate value below £2m by lifetime giving, pension contributions, or business investment can preserve £175,000 of RNRB, saving £70,000 in IHT.