Residence Nil Rate Band (RNRB)
The Residence Nil Rate Band (hereinafter referred to as RNRB) allowance came into effect 6th April 2017 with a then allowance of £100,000. The allowance is now £175,000. This is an additional tax free allowance for individuals who own their own home or a share of one. The RNRB allowance will apply in addition to an individual’s own Nil Rate Band (NRB) allowance, currently £325,000 for an individual. Both spouses or civil partners have a £175,000 allowance.
HMRC have provided guidelines as to whether a deceased’s estate might qualify for the RNRB. The following criteria must be met:-
- individual dies on or after 6th April 2017
- individual owns a home or a share of it. Only one home can be considered and the deceased must have owned or occupied as their home at some time. Buy to let property that the deceased did not live in will not qualify
- individual must bequeath their home in their Will to direct descendants, either children, grandchildren, adopted children or stepchildren. If there is no Will and the deceased dies intestate the direct descendants must inherit the home under the rules of intestacy
- total value of the individual’s estate does not exceed £2 million. If the estate exceeds £2 million the RNRB will be tapered down by £1 for every £2
In addition to the above, if an individual has downsized their home, gifted their home to a direct descendant (children, grandchildren, adopted children or stepchildren) or sold their home after 7th July 2015 the deceased’s estate will also be entitled to RNRB.
The RNRB is transferable between spouses and civil partners on death. Any unused RNRB on first death can also be used alongside any unused Nil Rate Band. If there is any unused RNRB available from the estate of the first to die then the unused percentage will be applied to the surviving spouse’s or civil partner’s estate as long as the date of the second death is post 5th April 2017. RNRB on the second death is available even if the first spouse or civil partner died before 6th April 2017. If an individual has previously had more than one spouse or civil partner you can only apply a combined total of 100% of the unused RNRB from each.