Tax Planning

The Residence Nile Fee Band – Tax Planning

With the residence zero rate tape (‘RNRB’) stay Frozen until April 2026Now there are even more reasons for you to review and explore your existing wills Inheritance tax (‘IHT’) Ways To Maximize The Availability Of This Precious Exemption, Flora Nelmes, Associate at Hunter Law, explained.

What is the RNRB?

the RNRB was introduced in 2017 to protect the single-family home from IHT. The RNRB, currently set at a maximum of £ 175,000 per person, is an additional IHT-free amount above the standard IHT zero rate band (‘NRB’), which is currently set at £ 325,000 and also through April 2026 is frozen.

The potential IHT savings can be significant. The RNRB, along with the Standard NRA, grants each individual a potential IHT-free allowance of £ 500,000 (£ 325,000 + £ 175,000) or £ 1 million for a married couple or domestic partner.

However, the RNRB will be “rejuvenated” at the rate of £ 1 per £ 2 excess if the total net value of the estate on death exceeds £ 2 million. If the estate is worth £ 2,250,000 or more, the RNRB will be completely lost. For IHT planning purposes, it should be noted that this value does not take into account lifelong gifts (even if made within the last seven years) but includes business and agricultural property.

How to qualify for the RNRB

In order to qualify for the RNRB, the deceased must have had a qualifying residential share (‘QRI’) at the time of death or the downsizing provisions must apply.


A QRI is generally an interest in a residential property that was the deceased’s domicile at one point in time. A QRI does not have to be the main residence of the deceased and could include a variety of less conventional apartment types if these were used as residence. While properties for rent may not qualify for purchase using QRIs, this may be a property that was once inhabited by the deceased but was later rented out to tenants. Holiday homes, whether in the UK or abroad, may also be eligible, provided they are not “excluded property” and have been used as residence by the deceased.

If the deceased has more than one QRI, only one can qualify and the personal representative of the deceased must make a nomination. In order to claim the RNRB, the QRI must be “closely inherited” as it is passed on to one or more of the following people after the death of the deceased:

  • the children of the deceased (this can include adoptive, foster or stepchildren) or grandchildren;
  • the spouses or partners of these children or grandchildren; or
  • the widows, widowers, surviving partners of these children or grandchildren, if they have not remarried at the time of the death of the property owner.

Downsizing Precautions

If the deceased has already sold or downsized their home, they may still be able to claim the RNRB if they meet the “Downsizing Policy”. The calculation formula is complex, but in short, the RNRB can still be compared to the original higher value of the earlier QRI, provided that the higher value is still represented in the deceased’s estate at his death and is closely inherited.

IHT opportunities

Lifelong planning

To increase your chances of qualifying for the RNRB, consider the following:

    • Giving away excess income to prevent your estate from growing above the £ 2 million threshold;
    • for estates close to £ 2 million, gifting of assets (excluding QRIs) to bring your estate below the taper threshold (if affordable);
    • For married couples or registered partners whose estate is less than £ 2 million but together are above the threshold:
    • Ensure that the performance of the two RNRBs is achieved by giving children part of their primary residence (or another QRI) in the event of their first death; or
    • by leaving other assets up to the value of the standard NRAs to children or a discretionary trust on first death to reduce the amount passed to the surviving spouse to keep the size of their estate below £ 2 million.
    • If the surviving spouse’s estate includes assets that are eligible for business or agricultural property relief and their value exceeds the total estate in excess of $ 2 million.


Trusts can be used in connection with the home for a number of reasons. The trust types used can affect the availability of the RNRB. In order to receive the RNRB, the main condition is that the property belongs to the estate of the deceased and, in the event of death, goes into the estate of a direct descendant. If a parent wants to leave their assets in trust for their children because they are too young or because they don’t want them to inherit directly, the following trusts can ensure that the RNRB is preserved:

  • Immediate Post-Death Interest Trust;
  • Surviving Minor’s Trust and 18-25 Trust;
  • Trust of a disabled person; and
  • Sheer trust.

Leaving assets to children with age restriction could result in the estate being ineligible for the RNRB as the gift is not absolute and restructuring the gift using one of the trusts listed above should be considered.

When property is left to a discretionary trust, the RNRB is not available as property cannot be “near inheritance” (even if the only potential beneficiaries are children or grandchildren). However, this can be remedied by appointing the trustee as explained below.

Planning after death

If the RNRB is not available in the event of death, the following measures can be taken within two years:

  • by testamentary beneficiaries who present a deed of amendment to redirect the apartment or part of it to a direct descendant; or
  • if the deceased has left his home to a discretion, the property is passed on to a direct descendant through trustees who exercise power of attorney.

The direct descendants within the meaning of the IHT and the RNRB are regarded as descendants who inherit directly from the deceased.

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