The Residence Nil-Rate Band in detail

The RNRB is generous but conditional. It's worth understanding the conditions because they catch out a lot of families.

The basic conditions

• Your estate must include a home you lived in (or previously owned).
• The home, or its value, must pass to direct descendants.
• Direct descendants means children (including step, adopted and foster), grandchildren, and their spouses. Siblings, nieces and nephews don't count.

The £2 million taper

The RNRB is reduced by £1 for every £2 that the total estate exceeds £2 million. That means:

• Estate up to £2m: full £175,000 RNRB.
• Estate at £2.35m (single) or £2.7m (couple with transferable RNRB): the RNRB is fully tapered to zero.

The downsizing addition

If you sell a more expensive home to move somewhere smaller (or into rental / care), you don't lose the RNRB: the addition rules preserve the value of the property you used to own, provided the assets ultimately pass to descendants.

Where it goes wrong

• Leaving property to a sibling, niece or unmarried partner disqualifies the RNRB on that share.
• Trusts that don't give descendants an "immediate post-death interest" can also lose it.
• Very large estates can lose it entirely to the taper, sometimes managed through lifetime gifting to bring the estate value down before death.