This note is intended to provide a brief overview of the new Residence Nil Rate Band introduced in the Finance (No. 2) Act 2015 and the supplementary Downsizing Provisions included in the Finance Act 2016. Both measures represent the government’s implementation of its May 2015 manifesto pledge to increase the Nil Rate Band for married couples and civil partners to £1 million.

The new legislation (now in force) came into effect in respect of deaths on and after 6 April 2017.  The basic idea is to give an additional Nil Rate Band – a “Residence Nil Rate Band” (RNRB) in respect of residential property which is left on death to direct descendants. This relief is in addition to the existing Nil Rate Band (NRB) and the proportion of RNRB unused at death can be passed on to a surviving spouse or civil partner in the same way as the NRB.

The basic components of the RNRB are set out below.

Amount of the relief

The maximum amount will increase as follows:

£100,000 for 2017/18 £125,000 for 2018/19 £150,000 for 2019/20 £175,000 for 2020/21


But this maximum is reduced if:

  • the value of the property (after deducting charges e.g mortgages etc.) is less;
  • if the taxpayer’s Estate at death (before deducting exemptions and reliefs) exceeds £2 million

In the case of Estates with a net value of over £2 million, there will be a tapered withdrawal of the RNRB at a rate of £1 for every £2 over the threshold.

Qualifying Residential Interest

Any residential property (or an interest in a residential property) which the taxpayer owned and lived in at some point as their residence. This includes property no longer owned at death (see Downsizing Provisions). Where there is more than one property owned at death the Executors can elect which property to apply.

Closely Inherited

Closely means that the property must be left on death to:

  • direct descendants i.e. children / grandchildren (including step, adopted children and foster children);
  • spouses and civil partners of children and widows / widowers who have not remarried in the case of pre-deceasing children.

Inherited means that the property is left outright by Will (or on intestacy), or to a Trust.

However, only a limited range of Trusts will attract the RNRB. For example, the relief would not apply if:

  • the property is left in a discretionary trust, even if all the beneficiaries of the Trust are direct descendants
  • the property is left “to such of my grandchildren as reach the age of 21” (in the case of a typical grandparental trust) and the grandchildren were still minors at the date of the taxpayer’s death.

Downsizing Provisions

In order not to discourage the sales of residential property, the RBRB relief will apply if the proceeds of sale of a property are also “closely inherited”. This would apply in respect of property sales on or after 8 July 2015 and covers the situation:

  • where the taxpayer downsizes;
  • where the property is sold (or given away) and not replaced e.g. because the taxpayer moves into residential care.

Will Drafting and Lifetime Planning

As each individual tax payer’s circumstances are different, we would highly encourage you to get in touch with a member of our Private Client Team for further information on the RNRB and to discuss IHT planning opportunities and Will drafting solutions which would help your Executors to secure the relief in the future.


Claire Gray

December 2017