The home-related allowance
Residence Nil-Rate Band
The residence nil-rate band can add up to £175,000 per person, but only when the home, beneficiaries and estate value meet the conditions.
General education, not personal financial, legal or tax advice.
Three core tests
- The estate includes a home the deceased lived in at some point.
- The home, or qualifying value under downsizing provisions, is closely inherited by direct descendants.
- The available band is not removed or reduced by the size of the estate.
Direct descendants
This includes children, grandchildren and certain other lineal descendants, with provisions covering adopted, foster and stepchildren. Leaving the home to a sibling, niece, nephew or friend does not satisfy this test.
The £2 million taper
For an estate above £2 million, the available residence nil-rate band reduces by £1 for every £2 above the taper threshold. The calculation uses the estate value before exemptions and reliefs in the way set out by the legislation; this can surprise estates rich in business or agricultural assets.
Downsizing does not always end the claim
Where a person sold or gave away a former home on or after 8 July 2015, a downsizing addition may preserve some allowance if other assets pass to direct descendants. The claim is evidence-heavy and should be checked carefully.
An unused percentage can transfer to a surviving spouse or civil partner, even where the first death occurred before the residence band was introduced. The combined transferred percentage is capped at 100%.
Direct answers
Frequently asked questions
Who counts as a direct descendant?
Children, grandchildren and other lineal descendants can qualify, together with certain spouses, civil partners, adopted children, foster children and stepchildren.
How does the £2 million taper work?
The residence nil-rate band is reduced by £1 for every £2 that the estate exceeds £2 million before reliefs are applied.