The Residence Nil Rate Band (RNRB) was introduced in 2017/18 and phased in over 4 years.
- £100,000 in 2017/18
- £125,000 in 2018/19
- £150,000 in 2019/20
- £175,000 in 2020/21
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It will remain unchanged at £175,000 until 2027/28. Thereafter it should increase in line with Consumer Price Index.
The value of the RNRB is the lower of the net value of the interest in the residential property (after deducting liabilities such as a mortgage) or the maximum amount of band.
However, the RNRB is tapered so that it will reduce by £1 for every £2 if the estate is above £2m (after deducting liabilities but before reliefs and exemptions).
For the RNRB to apply, a ‘Qualifying Residential Interest’ must be ‘closely inherited’.
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Qualifying Residential Interest (QRI).
A Qualifying Residential Interest (QRI) is an interest in a dwelling which has been the deceased’s residence at some time during their period of owning the property. Therefore, a buy-to-let property cannot qualify as a QRI. Although a QRI could include a dwelling that the deceased lived in previously and still owned, but which was rented out at the date of death.
For further information, see link to IHTM46011
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Closely Inherited
This means that the property must be inherited by a child of the deceased, or by a remoter lineal descendant of the deceased (e.g. the grandchild, great grandchild, or other child of a child of a child etc). The meaning of ‘child’ includes step-child, foster child and children for whom a person was appointed by a court order as a guardian or special guardian if that appointment took effect when the child was under the age of 18.
For further information, see link to IHTM46013
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Trusts
If a home is held in a trust or transferred to a trust when a person dies, the availability of the RNRB will depend on the type of trust.
This is because the type of trust will affect whether HM Revenue and Customs (HMRC) treat:
- the home as part of a person’s estate
- that person’s direct descendants as inheriting the home
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For further details click here.
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Transferring Unused RNRB
Any RNRB not used when someone dies can go to their spouse or civil partner’s estate when they die.
If the first person of a couple died before 6 April 2017, no part of the RNRB will be deemed to have been used on first death. This means that the estate of the surviving spouse/civil partner will always be entitled to 100% uplift in the transferrable RNRB – irrespective of whether the first person left an interest in a qualifying property direct to descendants (except where the estate of the husband exceeded the taper threshold of £2 million)
If the individual has had more than one spouse/civil partner, the estate can benefit from multiple RNRBs (subject to an overall maximum addition of 100%) i.e. total of 2 RNRBs.
For further details click here.
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