24th November 2025 | Rebecca Napier | Private Wealth. Residential Nil Rate Band, Inheritance Tax

The Residential Nil Rate Band, or RNRB, is an allowance that was introduced because rising property prices meant more families were being dragged into paying inheritance tax. The RNRB helps protect family homes and gives people a bit more flexibility when planning what they want to leave behind.

For many families, it can make the difference between a tax-free inheritance and a sizeable tax bill. 

So, What Is the RNRB?

The RNRB as a bonus tax-free allowance you can use on top of the usual £325,000 inheritance tax threshold. Currently it’s worth up to £175,000 per person.

Add that to the standard allowance and you’ve suddenly got £500,000 you can pass on without inheritance tax. For couples, that rises to £1 million if everything is left to each other and then to your ‘direct descendants’.

Who Gets to Use It?

In order to claim the allowance you do need to meet a few conditions:

  1. You must have a property that was your home

It doesn’t need to be your current home or your main home when you pass away—just a place where you lived at some point.

  1. You must leave that home to “direct descendants”

This usually means your children, stepchildren, adopted children, foster children, and grandchildren.

(Leaving your home to your niece, cousin or your best friend will not count). 

  1. Your estate can’t be too large

Once your overall estate goes above £2 million, the RNRB starts shrinking. Big estates may lose it entirely.

What If You’ve Downsized?

Good news: you don’t lose the allowance just because you moved somewhere smaller or more manageable.

Thanks to the downsizing rules, you may still be able to claim the RNRB if:

  • You once owned a qualifying home,
  • You sold it, and
  • You leave some of your estate to your direct descendants.

This gives people the freedom to downsize without worrying about losing valuable tax relief.

Things Worth Checking

  • Does your will leave your home to someone who counts as a direct descendant?
  • Is your estate close to the £2 million taper threshold?
  • Have you downsized or sold a home that might still qualify?
  • If you’re part of a couple, are you making the best use of transferable allowances?

Final Thoughts

The Residential Nil Rate Band is a genuinely useful tool for reducing inheritance tax.

Please contact us at Sherrards so we can assist you in Estate Planning and to help ensure that you have a well structured will.  This will enable you to make sure your family benefits from the full RNRB allowance and to make essential savings from inheritance tax. 

To find out more, please contact Rebecca Napier, or the Private Wealth team. 

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