Inheritance Tax on Property — Main Residence Nil-Rate Band Explained

The main residence nil-rate band is an additional inheritance tax threshold that can significantly reduce the tax payable when a family home passes to children or grandchildren on death. Introduced by the Finance (No.2) Act 2015 and consolidated in the Inheritance Tax Act 1984, the residence nil-rate band (RNRB) has been fixed at £175,000 per person since April 2020 and remains at that level in 2026. When combined with the standard nil-rate band of £325,000, a single person can potentially pass up to £500,000 free of inheritance tax if their home passes to a direct descendant — and a married couple or civil partners can double that to £1 million on the second death.

Yet the RNRB is one of the most misunderstood reliefs in inheritance tax law. It does not apply automatically to all property. It is subject to conditions around who inherits and how the estate is structured. It is tapered away for very large estates. And there are specific rules for people who downsized or sold their home before death. Executors and estate planners who overlook the RNRB — or who incorrectly assume it applies — can cause significant under- or over-payment of tax.

This guide explains in plain English how the residence nil-rate band works, who qualifies as a direct descendant, how to claim the relief on forms IHT435 and IHT436, and what happens if the estate exceeds the taper threshold. For a broader explanation of how inheritance tax is calculated on the whole estate, see our inheritance tax guide and our overview of probate costs.

What Is the Main Residence Nil-Rate Band?

The residence nil-rate band is an additional inheritance tax allowance available on top of the standard nil-rate band of £325,000. In 2026 it stands at £175,000 per person. It applies where a qualifying residential property — broadly, a home the deceased has lived in at some point — is included in the estate and passes to one or more direct descendants. The combined effect is that a single person with a home can potentially leave up to £500,000 inheritance-tax-free, while a married couple or civil partnership can shelter up to £1 million across both estates.

The RNRB is not a separate allowance for the property itself. It is an enhancement to the deceased’s overall nil-rate band, reducing the amount of the estate that is charged at the 40% inheritance tax rate. It is claimed on form IHT435, with form IHT436 used where a transferable RNRB from a predeceased spouse or civil partner is also being claimed.

The HMRC page on the residence nil-rate band provides the official rules and worked examples, but the plain-English explanation below should help executors understand the key conditions before engaging with HMRC’s guidance.

Who Qualifies as a Direct Descendant?

The RNRB only applies where the residential property passes to a direct descendant of the deceased. For these purposes, a direct descendant includes:

• A child (including adopted children, stepchildren, and foster children) of the deceased.
• A grandchild or more remote lineal descendant.
• The spouse or civil partner of any of the above — so a son-in-law, daughter-in-law, or the civil partner of a grandchild also qualifies.
• A child who has been treated as a child of the family in any marriage or civil partnership of the deceased.

Notably, the RNRB does not apply where the property passes to a sibling, niece, nephew, or unrelated beneficiary — even if that person had lived with the deceased or cared for them for many years. If the will leaves the home to a friend or a non-lineal relative, the RNRB is not available, and the full 40% rate applies to the excess above the standard nil-rate band. Estate planning advice from a solicitor can help structure a will to preserve the RNRB where the testator wishes to benefit non-descendants.

The Taper Threshold for Large Estates

The RNRB is phased out for estates whose net value exceeds £2 million. For every £2 by which the estate exceeds £2 million, the available RNRB is reduced by £1. This means that where the net estate is worth £2.35 million or more (in 2026), the RNRB is reduced to nil entirely — even if the property passes to a direct descendant. The taper is applied before any transferable RNRB from a predeceased spouse is added.

For very large estates, executors should review whether lifetime planning — such as gifts out of income or into trust — could bring the net estate below the taper threshold and restore some or all of the RNRB. This is a calculation that a specialist solicitor or tax adviser should perform, as the interactions with potentially exempt transfers and the seven-year rule are complex.

The Downsizing Addition: What If the Home Was Sold Before Death?

A common concern is that the RNRB will be lost if the deceased sold their home, moved into a care home, or downsized to a less valuable property before death. HMRC introduced the downsizing addition to address this concern. Where the deceased disposed of a former home on or after 8 July 2015 and the proceeds (or lesser-value replacement property) passed to a direct descendant, a downsizing addition can be claimed to restore some or all of the RNRB that would otherwise be lost.

The downsizing addition is calculated by comparing the value of the former home at the date it was sold (or transferred) with the RNRB in force at the date of death. The addition cannot exceed the RNRB itself and can only be claimed to the extent that there are other assets in the estate passing to direct descendants. The rules are complex and the claim is made on form IHT436. Careful record-keeping of property sale prices and dates is essential.

Transferring the RNRB Between Spouses and Civil Partners

Just as the standard nil-rate band can be transferred between spouses on death, the unused residence nil-rate band can also be transferred to the surviving spouse or civil partner. If the first spouse to die did not use their RNRB — for example, because their estate passed entirely to the surviving spouse under the spouse exemption and no home passed to a direct descendant — the unused percentage is preserved and added to the survivor’s RNRB on the second death.

The transferred RNRB is based on the percentage of the RNRB unused on the first death, applied to the RNRB figure in force at the second death. So if both spouses’ full RNRB is available on the second death, the survivor’s estate can benefit from up to £350,000 of residence nil-rate band in 2026, combined with the £500,000 possible from the standard nil-rate bands, giving a potential £1 million inheritance tax-free threshold for the couple. For the full picture of how this interacts with estate administration, see our guide to estate administration.

Claiming the RNRB: IHT435 and IHT436

The RNRB does not apply automatically — it must be positively claimed by the executors in the inheritance tax return. Form IHT435 is used to claim the deceased’s own RNRB and sets out details of the qualifying residential property, its value, and the direct descendants who benefit. Form IHT436 is used in addition where a transferable RNRB is being claimed from a predeceased spouse or civil partner. Both forms are supplementary schedules to the main IHT400.

Executors should ensure they review the will carefully to confirm that the property does in fact pass to a qualifying direct descendant, and that the estate falls below the taper threshold. Errors in claiming the RNRB — or failing to claim it at all — are among the more common mistakes seen in DIY probate applications, and they can result in significant overpayment of tax that is difficult to recover once the estate has been distributed.

Written by Simon Jenkins, SRA 167489, Solicitor at Curtis Legal Limited (SRA 450129). For advice on whether the residence nil-rate band is available in your estate, call freephone 0800 214 216 or request a same-day callback.