What is the residence nil rate band?
The residence nil rate band is an additional inheritance tax allowance of £175,000 for 2026/27, available where a main home passes to direct descendants such as children, stepchildren, adopted children or grandchildren. It is tapered away for estates worth more than £2 million.
The taper removes £1 of allowance for every £2 of estate above £2 million, so it is exhausted at around £2.35 million for an individual and around £2.7 million for a couple with both bands available. Business and agricultural reliefs do not reduce the estate for taper purposes, which catches business owners out regularly.
It applies only to direct descendants. Nieces, nephews, siblings and unmarried partners do not qualify, however close. A downsizing addition preserves it where the home was sold or traded down after July 2015.
It is transferable between spouses and is frozen until April 2031. A will leaving the home into a discretionary trust can inadvertently forfeit it, which is a common and expensive drafting oversight.