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What is the Residence Nil Rate Band?

What is the Residence Nil Rate Band?

The residence nil rate band (RNRB) came into effect in April 2017 and can be tested in any of the CII’s AF1, AF5, CF1, R01, R03 or R06 exams.

This article is relevant to examinable tax year 2021/22.

The RNRB is in addition to the normal IHT nil rate band (of £325,000 for 21/22) and is available when a home is passed on death to children (which include step-children, adopted or foster children) and their lineal descendants.

For 2021/22 the RNRB is £175,000 and is set to remain at this level until 2026.

How the RNRB Works

The value of the RNRB is the lower of the net value of the interest in the home (so after deducting any mortgage) and the maximum amount of the RNRB.  If a property is worth £125,000 and is left today to a child of the deceased, £125,000 is the amount of the RNRB available. The RNRB that hasn’t been used (£50,000 in this tax year) is available for transfer to a spouse or civil partner’s estate.

The RNRB is also available to those people who have downsized or stopped owning a home after 8 July 2015 and assets of an equivalent amount (up to the value of the RNRB) are passed on death to direct descendants.

For those people with an estate with a net value of more than £2m (so after liabilities/expenses but before reliefs and exemptions such as the nil rate band, spouse exemption and business relief), the RNRB is tapered.  For every £2 over the £2m threshold, £1 of RNRB is lost – so in this tax year will be lost altogether where an estate is valued at £2,350,000 and more.

In practical terms, this means that in 2021/22, we can pass on up to £500,000 IHT free.  A married couple/civil partnership can leave £1million of their estate IHT free.

The Residence Nil Rate Band (RNRB) can be tested in any of the CII's AF1, AF5, CF1, R01, R03 or R06 exams. Click To Tweet



Rob and Gillian were married.  Rob died in 2015 and left everything to Gillian who dies in September 2021 leaving everything to their 3 children. The value of their marital home is £350,000. Gillian also had other assets worth £850,000.

The value of their home is covered by the £350,000 RNRB, £175,000 of which has been claimed as a transfer from Rob.

Gillian also has her own nil rate band and also the transferable NRB that was unused when Rob died – this amounts to £650,000

In this example, £200,000 is liable to IHT at 40% ie £80,000.

Grab the resources you need!

If you’re studying for your CII AF1 exam, and you’re not feeling 100% confident of a pass, grab our free taster to try out one of Brand Financial Training’s calculation workbooks for yourself.  Click the link to download the AF1 Calculation Workbook taster now!

Click here to download our free calculation workbook taster for CII AF1

Alternatively, you can download the taster for AF5, CF1R01, R03 or R06 if one of those exams is on your horizon.