The RNRB is an important relief to consider when undertaking IHT planning on your estate. Currently the RNRB is set at £175,000, until at least 5 April 2026.
Just like the standard NRB of £325,000, your spouse or civil partner may inherit your unused RNRB, so in practise you will both have combined RNRBs and NRBs of up to £1,000,000 (£325,000 + £175,000 each) for IHT purposes, assuming the combined value of your qualifying properties is at least £350,000.
There are some differences between the two reliefs that need to be considered. The RNRB only applies against transfers of a qualifying residence (usually your main residence) on your death to your direct descendants (children, including adopted, step and foster children, and grandchildren). It cannot be used to relieve any lifetime transfers that you may make.
The RNRB is tapered away if on death the value of your estate exceeds £2,000,000, reducing by £1 for every £2 of the excess. Therefore, if your estate is worth £2,350,000 or more, the RNRB will be reduced to £nil. If the first spouse does not use their RNRB and on death the value of the second spouse’s estate is £2,700,000 or more, their RNRB will be also tapered down to £nil.
What should you do?
There is planning that you can consider, whether as an individual or part of a couple, to secure the full £175,000 allowance where it may otherwise not be available. This would particularly be the case where there is an opportunity to reduce the value of your estate to £2,000,000 or less, or indeed that of your spouse or civil partner. Perhaps now is the time to review your current will or look at the estate planning opportunities that may be available to you.
The RNRB is an important relief to consider when undertaking IHT planning on your estate. Currently the RNRB is set at £175,000, until at least 5 April 2026.
Just like the standard NRB of £325,000, your spouse or civil partner may inherit your unused RNRB, so in practise you will both have combined RNRBs and NRBs of up to £1,000,000 (£325,000 + £175,000 each) for IHT purposes, assuming the combined value of your qualifying properties is at least £350,000.
There are some differences between the two reliefs that need to be considered. The RNRB only applies against transfers of a qualifying residence (usually your main residence) on your death to your direct descendants (children, including adopted, step and foster children, and grandchildren). It cannot be used to relieve any lifetime transfers that you may make.
The RNRB is tapered away if on death the value of your estate exceeds £2,000,000, reducing by £1 for every £2 of the excess. Therefore, if your estate is worth £2,350,000 or more, the RNRB will be reduced to £nil. If the first spouse does not use their RNRB and on death the value of the second spouse’s estate is £2,700,000 or more, their RNRB will be also tapered down to £nil.
What should you do?
There is planning that you can consider, whether as an individual or part of a couple, to secure the full £175,000 allowance where it may otherwise not be available. This would particularly be the case where there is an opportunity to reduce the value of your estate to £2,000,000 or less, or indeed that of your spouse or civil partner. Perhaps now is the time to review your current will or look at the estate planning opportunities that may be available to you.
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Wills and estate planning
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Re-gifting inheritance using a Deed of Variation to minimise tax
