Can you benefit from the residence nil-rate band?
The residence nil-rate band adds up to £175,000 to an estate where a home is inherited by direct descendants. It is conditional in ways the basic band is not: the property has to qualify, the beneficiaries have to be the right ones, and the whole band tapers away on estates above £2 million.
- The amount: up to £175,000 per person, on top of the £325,000 nil-rate band.
- The property test: a residence the deceased lived in at some point, passing on death.
- The beneficiary test: children, grandchildren, stepchildren and their spouses — not siblings or nephews.
- The taper: £1 of band lost for every £2 of estate above £2 million.
01 What has to be true for it to apply
Two conditions have to be met. There must be a residential property that the deceased lived in as a home at some point, and it must pass on death to a direct descendant. Both are stricter than they sound and both are regularly failed by ordinary arrangements.
Direct descendants means children, grandchildren, stepchildren, adopted and foster children, and in some cases their spouses or civil partners. It does not mean siblings, nephews, nieces or friends. A childless couple leaving everything to a niece gets no residence band at all, whatever the property is worth.
A buy-to-let never lived in does not qualify. A home sold before death may still qualify through the downsizing addition, which preserves the band where a property was sold or downsized on or after 8 July 2015.
Source: Residence nil rate band
02 The £2 million taper
The residence band is reduced by £1 for every £2 of estate value above £2 million, so it is gone entirely at £2.35 million for a full band. The taper is applied to the estate before reliefs and exemptions, which means business or agricultural property can push an estate over the threshold even though it is itself relieved.
That produces a marginal rate above 40% in the taper zone, in the same way the personal allowance taper does for income. An estate at £2.1 million loses £50,000 of band, so £50,000 of the estate is effectively taxed twice over.
It also makes lifetime giving unusually valuable for estates near the threshold, because reducing the estate below £2 million restores band that is worth 40% of itself.
Shows: the residence nil-rate band left after the £2 million taper, and the tax that costs. Ignores: whether the property and beneficiaries qualify, the downsizing addition, and reliefs on business or agricultural property.
On the defaults above, the worked example shows £250,000. £100,000 of residence band is tapered away, costing £40,000 in extra Inheritance Tax.
Source: Passing on a home
03 How the will can destroy it
The band depends on the property passing to a direct descendant, so a will leaving the home into a discretionary trust can fail the test even where the eventual beneficiaries are the children. Older wills drafted before 2017 frequently contain exactly this structure, put in for reasons that no longer apply.
Life interest trusts for a surviving spouse generally work, and a discretionary trust generally does not without action within two years of death. This is the single most common way the band is lost, and it is lost silently — nothing about the will announces it.
Any will written before the band was introduced in April 2017 is worth reviewing for this reason alone, alongside the transfer of an unused band from a first death.
Source: Wills, probate and inheritance
This band is worth £70,000 of tax per person and it is conditional in three separate ways, any of which can be failed by a will nobody has read since 2015. Check three things: that a property you actually lived in is passing, that it is passing to children or grandchildren rather than into a discretionary trust, and that the estate is not drifting toward £2 million. The third one creeps up on people — the taper is applied before reliefs, so a business that pays no Inheritance Tax itself can still cost you the residence band.
FAQ
Do I lose the band if I sell my home before I die?
Not necessarily. The downsizing addition preserves the band where a property was sold or downsized on or after 8 July 2015, provided assets of equivalent value pass to direct descendants. It has to be claimed, and it is easy to miss.
Does a discretionary trust in my will affect it?
It can destroy it. The band requires the residence to pass to a direct descendant, and a home left into a discretionary trust generally fails that test even where the children are the eventual beneficiaries. Wills written before April 2017 are worth reviewing for this.
What if I have no children?
Then the residence band is not available, because it requires a direct descendant — children, grandchildren, stepchildren and their spouses. Siblings, nephews and nieces do not qualify, however close the relationship.
Sources
Regulator references
- Residence nil rate band · HM Revenue and Customs · 2025The conditions a home has to meet for the extra band to apply.Last verified: 2026-09-07
- Passing on a home · GOV.UK · 2025The residence nil-rate band and the taper that removes it on large estates.Last verified: 2026-09-07
- Wills, probate and inheritance · GOV.UK · 2025The intestacy rules that apply when no valid will exists.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.