What is Tax Residence Nil Rate Band?
The Inheritance Tax Residence Nil Rate Band (RNRB) is a transferable allowance available to married couples and civil partners when their main residence is inherited by direct descendants, such as their children or grandchildren.
What is the residence nil rate band for 2024/25
The residence nil rate band is available with a maximum allowance of up to £175,000 per person. If it remains unused, this allowance can be transferred to a surviving spouse or partner. It is in addition to the existing £325,000 Inheritance Tax (IHT) nil-rate band.
Together with the current Inheritance Tax limit of £325,000, this allows married couples and civil partners to pass on property valued up to £1 million free of IHT to their direct descendants.
How do I claim the transfer of residence nil date band
However, the transfer of the unused RNRB does not happen automatically; it must be claimed from HMRC when the second spouse or civil partner passes away. Typically, the estate executor will file a claim to transfer the unused RNRB from the estate of the first deceased spouse or civil partner. This transfer can also be claimed even if the first spouse or civil partner died before the RNRB was introduced on 6 April 2017.
What happens if I exceed the transfer nil rate band allowance?
It is important to note that the RNRB is tapered for estates valued over £2 million, even if the family home is left to direct descendants. For every £2 that the estate exceeds the £2 million threshold, the RNRB is reduced by £1, potentially eliminating the allowance entirely.
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If you're unsure how to navigate your inheritance tax obligations, Moore South can help you understand your current allowances and how to use them efficiently. For more help with your inheritance tax, contact Moore (South) today.