Main Residence Nil-Rate Band Print

The Main Residence Nil-Rate Band was introduced for deaths on or after 6 April 2017. This relief applies where:

An individual’s main residence is passed on death to a direct descendant of that individual; or

The individual had downsized his home or ceased to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the Main Residence Nil-Rate Band are passed on death to direct descendants.

The relief was phased in over 4 years but for deaths on or after 6 April 2020, the relief is the lower of £175,000, or the net value of the inherited interest.

It was originally announced that after 2020/21 the relief will increase in line with the Consumer Prices Index. However, it was confirmed in the Budget on 3 March 2021 that the relief would be maintained at a maximum of £175,000 until 5 April 2026.

This relief is targeted at estates with a net value of £2m or less, and is withdrawn at the rate of £1 for every £2 that the net value of the estate of the deceased individual exceeds

£2m. Accordingly, no relief is available where the net value of the deceased’s estate is

£2,350,000, or more.

Any unused relief will be transferable to the surviving spouse in the same way as the Nil-Rate Band so that on the death of the surviving spouse up to £1m may be transferred to direct descendants free of IHT.

Often, the most valuable asset an individual has will be his home. There are provisions which prevent avoidance of IHT by the individual gifting the home to his children during his lifetime if he continues to live in the home, other than by paying a full market rent. The introduction of the Main Residence Nil-Rate Band should hopefully mean that in many cases there will be no IHT payable on the family home.

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