Property owners can shield up to £1,000,000 from inheritance tax — but only if their Will is structured correctly.
The Residence Nil-Rate Band (RNRB) adds £175,000 per person to the standard nil-rate band of £325,000, giving married couples a combined IHT-free allowance of up to £1,000,000. Yet many families miss out because their Wills were written before the rules changed in 2017, or because the property is left to the wrong people.
Three conditions must be met: you must own a qualifying residential property, leave it to direct descendants (children, grandchildren — not siblings or friends), and your estate must not exceed the £2,000,000 taper threshold.
The taper is catching more people every year. With property values rising and the threshold frozen until at least 2028, estates that were comfortably within limits five years ago may now face a reduced or eliminated RNRB.
Common mistakes that cost families thousands:
• Leaving property to a discretionary trust instead of directly to children
• Not updating a pre-2017 Will to reflect the RNRB conditions
• Failing to account for life insurance proceeds that push the estate above £2,000,000
• Gifting the property but continuing to live in it rent-free
The good news: if you have downsized or moved into care, a “downsizing addition” may still preserve your allowance — provided the remaining assets pass to direct descendants.
Action points: Review your Will, calculate your total estate value, check your trust arrangements, and take professional advice. The RNRB is one of the most generous tax reliefs available, but it only works with proper planning.