Thresholds and rates
Residence nil rate band: the extra allowance for a home left to family
The second band in inheritance tax only works for one asset and one group of people. Most of its rules are about who those people are and what the asset is worth.
The residence nil rate band is an extra inheritance tax allowance of up to £175,000 in 2026/27, frozen until 5 April 2031, available when a home the person lived in, or their share of it, is left to direct descendants: children, grandchildren and further generations, their spouses or civil partners, and step, adopted and foster children. It is added to the nil-rate band of £325,000. It can never exceed the value of the home that passes to them, so a £100,000 flat left to a son gives a band of £100,000, and the unused part cannot shelter savings. It is reduced by £1 for every £2 by which the estate exceeds £2,000,000, and whatever is unused at the first death of a married couple passes as a percentage to the survivor's estate. From 6 April 2027 unused pension funds join the estate and so count for that taper, while the home remains the only asset the band itself can cover.
Residence nil-rate band of an estate
Residence band available
£175,000
| Allowance with any transfer | £175,000 |
| Lost to the £2 million taper | £0 |
| Capped at the home’s value | No |
Law read and sums checked by Radif Partners · Editorial policy · How the tax is worked out
Who counts as a direct descendant
The list in HMRC’s guidance on the residence nil rate band is narrower than "family" in everyday speech. It covers children, grandchildren and every later generation in the direct line; their husbands, wives and civil partners; and step-children, adopted children, foster children and children under guardianship. It does not cover brothers and sisters, nephews and nieces, cousins, parents, friends or an unmarried partner. A home left to any of them uses only the ordinary band. The point matters most to people without children, whose position is set out in the guide for estates without children.
The home can be shared among several descendants, or between descendants and other people. What matters is the share of its value that is "closely inherited". If half the home goes to a child and half to a sibling, only the child's half counts towards the band.
A home the person lived in, and a cap at its value
The asset has to be a home the person lived in, or a share of one, so property only ever let to tenants does not qualify. The band is the lower of two figures: the maximum, £175,000 adjusted for any taper and transfer, and the value of the share of the home passing to descendants. Value above the band is simply part of the estate; value below it leaves part of the band unused, and that unused part cannot be set against cash, shares or a pension. As GOV.UK’s page on passing on a home puts it, the band only applies to the home.
Sold before the family receives it
Executors often sell the house to pay debts or to divide the estate evenly. HMRC's guidance says the band remains available when the home is sold as part of the administration and the proceeds go to the direct descendants; it is also unaffected if the descendants inherit the home and sell it themselves afterwards. A will that leaves the home to the children but allows the executors to sell and pass on the money therefore keeps the band.
Homes left on trust are a separate question. Whether a descendant's interest under a trust counts as inheriting the home depends on the type of trust and its terms, which HMRC's guidance handles separately. This site does not cover trusts; a solicitor reading the will is the person to ask.
Downsizing and moving into care
Someone who sells a large house and buys a smaller one, or moves into care and sells up, could lose part of the band simply because the home they own at death is worth less or no longer exists. The downsizing addition repairs that for moves on or after 8 July 2015. The executors claim it on form IHT435, and the amount depends on the values of the home given up and of what is left in the estate. This page gives no figure for it, because each case starts from its own values and dates.
HMRC’s examples at 2026/27 values
HMRC illustrates the rules with a set of cases. The table re-runs the main patterns with the engine at the frozen 2026/27 amounts, with our own figures and labels. The tax column is shown where the whole estate is described.
| Case | Residence band | Inheritance tax |
|---|---|---|
| Home £300,000 and other assets £190,000 to the children | £175,000 | £0 |
| Flat £100,000 and £400,000 to a son, the rest to the husband | £100,000 | £30,000 |
| Home £500,000, half to a step-son, half to a nephew | £175,000 | depends on the rest |
| Estate £2,100,000 including a £450,000 home to children | £125,000 | depends on the rest |
| Widow, estate £1,800,000, home £500,000, husband’s band partly unused | £300,000 | depends on the rest |
In the first case the home covers the full band and the nil-rate band absorbs the rest, so nothing is due and 3.1 % of the nil-rate band is left unused, a share that the estate of a surviving spouse, if there were one, could claim later. In the second, the flat is worth less than the maximum, so the band is £100,000 and 42.9 % of it remains for the husband's estate later. In the third, the step-son's half share of £250,000 exceeds the maximum, so the band is capped at £175,000, and the nephew's half earns nothing. In the fourth, an estate £100,000 above the taper threshold loses £50,000 of band, leaving £125,000.
Giving the home away during life
The residence band is an allowance of the estate at death. It never applies to lifetime gifts, so a parent who hands the house to the children years before dying gets no residence band on that gift: if death follows within 7 years, the gift is set against the ordinary nil-rate band instead, with taper relief where it applies. Handing over the deeds while carrying on living in the house without paying rent achieves even less. GOV.UK treats that as a gift with reservation, and the home stays in the estate as if it had never been given. The ${h.P.iht.giftYears} year rule page sets out the taper on gifts.
The band also plays no part in the 36 % charity rate test. When the baseline amount is worked out, the nil-rate band left is deducted but the residence band is not, so a large home left to children does not make it easier to reach the 10 % share.
Passing the unused band to a spouse
The last row follows a couple. The husband dies first with an estate of £2,100,000 and leaves the home to his wife. His band is tapered to £125,000 and none of it is used, because nothing went to descendants. Under the transfer rules, 71.4 % of his band is unused, measured against the full £175,000. When the widow dies with £1,800,000, a £500,000 home going to the children, her estate has her own band plus 71.4 % of the band then in force: £300,000 in all. The transferable band guide covers the percentage in more detail.
The pension does not earn the band, but it can take it away
From 6 April 2027, section 150A adds unused pension funds to the estate. The pension can never be covered by the residence band, which belongs to the home alone, but it does count towards the £2,000,000 test. A single person with an £800,000 home left to two children, £900,000 of savings and a £450,000 pension keeps a residence band of £175,000 for a death before the change and £100,000 after it, because the estate counted is now £2,150,000. The taper guide explains the marginal rate this creates.
The calculator above takes the home, the whole estate and any transferred share and returns the band. It is a guide to the rules, not a valuation of an estate; the executors, with a solicitor or regulated adviser where needed, confirm the band for a real death.