tanding the Residence Nil Rate Band for Downsizers

Understanding the Residence Nil Rate Band for Downsizers

The Residence Nil Rate Band (RNRB) allows individuals to pass on an additional amount of their estate tax-free when leaving their main residence to direct descendants. As of the 2025/26 tax year, the RNRB is £175,000. This means that, combined with the standard nil rate band of £325,000, up to £500,000 can be passed on free of Inheritance Tax. For married couples or civil partners, this can total £1 million.

Downsizing and the RNRB

Even if you no longer own a residence at the time of your death, you can still benefit from RNRB. This applies if you’ve downsized to a less valuable home or sold your property after 8 July 2015. To qualify, the following conditions must be met:

  • The original property would have qualified for the RNRB if retained until death.
  • Assets of equivalent value are left to direct descendants, such as children or grandchildren.

For example, if you sold your home to move into residential care, your estate could still claim the RNRB, provided your will is appropriately structured. However, if you have no direct descendants, the RNRB may not apply.

Calculating the Downsizing Addition

The downsizing addition is calculated based on the value of the residence sold and the value of assets left to direct descendants. The aim is to ensure that individuals who downsize or sell their home are not disadvantaged regarding the RNRB. Detailed guidance on this calculation is available on the HMRC website.

How We Can Help

Navigating the complexities of Inheritance Tax and the Residence Nil Rate Band can be challenging. At Lewis Brownlee, we offer expert advice to ensure your estate planning is tax-efficient and aligns with current legislation. For personalised guidance, please contact us.

Understanding the Residence Nil Rate Band for Downsizers is crucial for effective estate planning. By ensuring your will is correctly structured and assets are appropriately allocated, you can maximise the tax-free benefits available to your estate.