Introduction to the Residential Nil Rate Band

By now you have probably heard about the Residential Nil Rate Band (RNRB), which has also been referred to as the Main Residence Nil Rate Band or simply ‘the family home allowance’. This new allowance was announced in the Summer 2015 Budget and will take effect from 6 April 2017.

The RNRB will be an additional allowance to the current nil rate band (NRB) which currently stands at £325,000 and will be frozen at this figure until the end of 2020 to 2021. The RNRB will be introduced in stages until it reaches the full amount of £175,000 after 6 April 2021. From this point onwards it will rise each year in line with the Consumer Prices Index. The new allowance will be phased in as follows:

  • £100,000 for 2017 to 2018
  • £125,000 for 2018 to 2019
  • £150,000 for 2019 to 2020
  • £175,000 for 2020 to 2021

This will mean that by 2020-21 married couples and civil partners may pass on up to £1 million worth of assets to their children and grandchildren free of inheritance tax.

The RNRB will be limited to only one residential property. If you own more than one property then your personal representatives will need to elect one qualifying property. To qualify for the allowance a property must currently be your main residence or have been used as your main residence at one point. The property that you own as a buy to let and have never used as your residence will not qualify for the RNRB.

A property must be “closely inherited” by Will or under the rules of intestacy.  “Closely inherited” here means that the property must be inherited by your children, grandchildren or other direct lineal descendants. This also includes your step-children, adopted children, children of whom you have been appointed a guardian of, and also fostered children.

The RNRB will also be available where the property is left on trust where the lineal descendant is treated as the owner of the property for inheritance tax purposes (immediate post death interest trusts, disabled persons trust, bereaved minor or 18-25 trusts). The RNRB will not ordinarily be available where the property is left on discretionary trusts, even if all of the discretionary beneficiaries are direct descendants.

If the net value of your estate is over £2 million (the ‘taper threshold’) then the RNRB will be reduced by £1 for every £2 that the net value of your estate exceeds £2 million.

Finally, the RNRB may be transferred in the same manner as the NRB. On the death of a surviving spouse or civil partner their personal representatives may apply for any unused RNRB to be transferred.


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  • Julie Ferguson

    10th June 2016 at 3:55 pm

    5 out of 5

    So how in practise does it work. Say the property is worth £500,000 and there are savings of £700,000 So overall assets of 1.2 million. Does the MRNRB only cover the property ot are savings added in as it is at the moment?


    • [email protected]

      14th June 2016 at 2:41 pm

      Hi Julie,

      The RNRB will only apply to the property (“qualifying residential interest”) provided all other conditions are met and will be applied before the standard NRB. The standard NRB will remain available on top of the RNRB.

      Best regards,

      SWW Team


  • John Ford

    20th June 2016 at 2:36 pm

    5 out of 5

    Does this mean that anyone with a will including a PPT will not qualify for the extra?


    • [email protected]

      23rd June 2016 at 2:53 pm

      Hi John,

      The RNRB will still be available where a person has a life interest in a trust containing the qualifying residence provided that that the property is “closely inherited” so at the end of the life interest the property passes to lineal descendants.

      The SWW


  • Lorenc Barci

    4th November 2021 at 11:12 am

    Hi ,
    If for example a person leaves his main home residence in a PPT to a non married partner so when she dies it goes to his children, can RNRB be used?
    If you can, can it be used before it goes to the trust or when is passed to the children?
    If you can’t and lets say he only owned a property worth 700K, will IHT over NRB be due in both settlor’s and tenants death?
    Many Thanks


    • Siobhan Rattigan-Smith

      11th November 2021 at 2:36 pm

      Hi Lorenc, If when the partner died the property passed to the first partner’s children and these were not also the second partner to die’s children no RNRB would be available. IHT would be due on everything over the NRB on the first death, and then again on the second death.


  • Stacey

    3rd May 2022 at 12:55 pm

    Is the NRB limited to the value of the property? For example, if the property was valued at £325000 and there were £175000 in other assets (bank, pension etc.) Would this all be free from inheritance tax for a direct descendant? Or, only the value of the property?
    Thank you


    • Siobhan Rattigan-Smith

      13th May 2022 at 9:32 am

      Hi Stacey, the RNRB is limited to the value of the property that is being closely inherited but the ordinary NRB is not limited to any particular type of asset. In your example everything may be free from IHT. The RNRB would be applied to the property first and then the NRB applied to the value of any remaining assets.


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