Inheritance Tax on £2 Million Estate UK: RNRB Taper, How Much IHT, and How to Reduce It (2026)
A £2 million estate sits exactly at the RNRB taper threshold — at £2m the full RNRB (£175,000) is still available, but every pound above £2m erodes it. The taper fully eliminates the RNRB for a single person at £2.35m (adding up to £70,000 in IHT) and for a couple at £2.7m (adding up to £140,000). Lifetime gifts — not BPR — are the key to staying below the threshold.
| Scenario | Threshold | Taxable | IHT | RNRB Taper |
|---|---|---|---|---|
| Single, £2m — RNRB (home to children) | £500,000 (NRB £325k + RNRB £175k) | £1,500,000 | £600,000 | NONE — exactly at £2m taper threshold; full RNRB still available |
| Single, £2m — no RNRB (home in trust / no home) | £325,000 (NRB only) | £1,675,000 | £670,000 | N/A — no RNRB to taper |
| Married couple, £2m (survivor's estate) — full tNRBs + tRNRBs | £1,000,000 | £1,000,000 | £400,000 | NONE — £2m exactly; full tRNRBs (£350k) still available |
| Married couple, £2m (survivor's estate) — tNRBs only (no RNRB) | £650,000 | £1,350,000 | £540,000 | N/A — no RNRB |
| Single, £2.1m — RNRB tapered | £375,000 (NRB £325k + reduced RNRB £50k) | £1,725,000 | £690,000 | Excess £100k above £2m; reduction £50k; RNRB = £125k |
| Single, £2.35m — RNRB fully tapered to £0 | £325,000 (NRB only; RNRB = £0) | £2,025,000 | £810,000 | FULLY TAPERED: excess £350k; reduction £175k = RNRB £0 |
| Couple, £2.7m (survivor's estate) — both tRNRBs fully tapered | £650,000 (tNRBs only) | £2,050,000 | £820,000 | FULLY TAPERED: excess £700k; reduction £350k = combined RNRB £0 |
IHT rate: 40% (s7 IHTA 1984). NRB: £325,000 (frozen to 2030). RNRB: £175,000 (frozen to 2030). RNRB taper: s8E IHTA 1984 — £1 per £2 excess above £2m adjusted net estate. Taper calculated on s8F IHTA "adjusted net estate" = net estate BEFORE BPR/APR reliefs. Single taper full at £2.35m (excess £350k; reduction £175k = £0 RNRB). Couple taper full at £2.7m (excess £700k; reduction £350k = £0 combined RNRBs). Transferred NRB: s8A IHTA 1984 — claim IHT402. Transferred RNRB: s8G IHTA 1984 — claim IHT436. Spousal exemption: s18 IHTA 1984. Direct descendants: s8K IHTA 1984. RNRB preserved: IPDI trust (s49A IHTA; s8H IHTA). RNRB LOST: discretionary trust; property passing to non-direct-descendant. Downsizing addition: ss8FA-8FE IHTA (if home sold/downsized after 8 Jul 2015 and estate otherwise qualifies). BPR: s105(1)(bb) IHTA 1984 — AIM shares 100% exempt after 2yr; £1m combined BPR/APR cap April 2026; does NOT reduce adjusted net estate for RNRB taper.
IHT on £2 Million Estate: The RNRB Taper and Planning Guide
IHT on a £2 million estate — the base calculation
A £2,000,000 estate sits exactly at the RNRB taper threshold (s8E IHTA 1984) — making it a critical planning point. At exactly £2m, the RNRB is still fully available; every £1 above £2m begins to reduce it. The base IHT calculation: Single person with RNRB (home passes to direct descendants): NRB £325,000 + RNRB £175,000 = £500,000 threshold. Taxable: £1,500,000. IHT: 40% × £1,500,000 = £600,000. Single person without RNRB (home in a discretionary trust, or home already disposed of without downsizing addition): NRB £325,000 only. Taxable: £1,675,000. IHT: 40% × £1,675,000 = £670,000. The RNRB alone saves £70,000 at a £2m estate (40% × £175,000). Married couple with full transferred NRBs (IHT402 — s8A IHTA 1984) and transferred RNRBs (IHT436 — s8G IHTA 1984) — survivor's estate: combined threshold £1,000,000; taxable £1,000,000; IHT £400,000. Married couple with transferred NRBs only (no RNRB — home in discretionary trust): threshold £650,000; taxable £1,350,000; IHT £540,000. The combined RNRB for a couple (£350,000) is worth £140,000 in IHT savings (40% × £350,000). For any estate sitting close to £2m, the critical question is: will the estate be above or below £2m on death? Even a small overshoot begins to erode the RNRB, making lifetime planning to reduce the estate below £2m highly valuable.
The RNRB taper — how it works above £2 million
The RNRB taper (s8E IHTA 1984) reduces the RNRB by £1 for every £2 by which the adjusted net estate exceeds £2,000,000. The 'adjusted net estate' is calculated under s8F IHTA 1984 and is broadly the net estate (after deductible liabilities and funeral expenses) BEFORE deduction of IHT reliefs such as Business Property Relief (BPR) or Agricultural Property Relief (APR). This means that investing in AIM shares qualifying for BPR does NOT reduce the adjusted net estate for RNRB taper purposes — HMRC uses the gross asset value including the AIM shares. Only actual reductions in estate value (lifetime gifts, charitable legacies) bring the estate below the £2m taper threshold. Taper calculation examples: Estate £2.1m: excess = £100,000; RNRB reduction = £50,000; RNRB available = £125,000; threshold = NRB £325,000 + RNRB £125,000 = £450,000; IHT = 40% × £1,650,000 = £660,000. Estate £2.2m: excess = £200,000; reduction = £100,000; RNRB = £75,000; threshold = £400,000; IHT = 40% × £1,800,000 = £720,000. Estate £2.35m: excess = £350,000; reduction = £175,000; RNRB = £0; threshold = £325,000 (NRB only); taxable = £2,025,000; IHT = £810,000 — the IHT at £2.35m with the taper fully eliminating the RNRB is £210,000 more than at £2m. For a married couple (survivor's estate): both RNRBs (£350,000 combined) are tapered using the same formula; fully tapered at estate of £2.7m (excess £700,000; reduction £350,000; RNRBs = £0). Estate £2.5m: excess = £500,000; combined RNRB reduction = £250,000; RNRBs remaining = £100,000; threshold = £750,000; IHT = 40% × £1,750,000 = £700,000.
Reducing a £2 million estate to recover the RNRB — planning strategies
For estates near the £2m taper threshold, reducing the estate below £2m can recover the full RNRB (worth £70,000 for a single person; £140,000 for a couple). Key strategies: (1) Lifetime PETs (s3A IHTA 1984): giving assets to children during lifetime reduces the estate immediately. The PET drops out of the estate entirely after 7 years — if a £2.1m estate person gives away £150,000, the estate falls to £1.95m (below £2m); full RNRB restored on death after 7yr. Even if death occurs within 7yr: taper relief on the PET (3-7yr reduces IHT on the gift), and the estate below £2m means the RNRB is restored for the remaining estate. (2) Annual exemption (s19 IHTA 1984): £3,000/yr immediately reduces the estate; £6,000 in year 1 (if prior year unused); over 10 years = £30,000 of estate reduction; modest but certain. (3) Normal expenditure from income (s21 IHTA 1984): for individuals with income surplus above £2m, regular gifts from income are immediately exempt; compound reduction in the estate over years; can significantly reduce a £2-£2.5m estate over 5-10 years. (4) Charitable legacies: a legacy in the will to a qualifying charity (s23 IHTA 1984) reduces the chargeable estate. Unlike BPR, a charitable legacy DOES reduce the adjusted net estate for RNRB taper purposes — leaving enough to charity to bring the estate below £2m can restore the full RNRB. Example: estate £2.1m; charitable legacy £150,000; chargeable estate = £1.95m (below £2m); full RNRB restored; IHT = 40% × £1,450,000 = £580,000 PLUS no IHT on the £150k charity gift; saving vs no charity and RNRB tapered: significant. Seek professional advice on the interaction between the charitable legacy, 36% reduced rate (s36 IHTA), and the RNRB taper for estates near £2m. (5) BPR investing (AIM shares): reduces IHT on the BPR assets but does NOT bring the estate below the RNRB taper threshold — AIM shares are still counted in the adjusted net estate. Effective for reducing the overall IHT bill but not for RNRB preservation.
Married couple planning at £2 million — second death considerations
For a married couple whose combined estate is £2m (and is held primarily in the survivor's estate on second death), the RNRB situation at exactly £2m is favourable: no taper; full combined RNRB of £350,000 available. The critical risk: if the survivor's estate grows above £2m before death (e.g. property price appreciation, investment growth, pension drawdown accumulation post-2027), the combined RNRB begins to erode. Key planning for a couple with a £2m combined estate: (1) Use the transferred NRB (IHT402 — s8A IHTA 1984) and transferred RNRB (IHT436 — s8G IHTA 1984) — these are NOT automatic; executors must CLAIM them on the IHT400 after the second death; missed claims have occasionally been the subject of professional negligence cases; (2) Ensure the will correctly directs the home to the children (not a discretionary trust) to preserve the RNRB; (3) Joint tenancy vs tenants in common: for a couple with a home worth £1m+ and other assets, the joint tenancy is usually fine (home passes to spouse by survivorship; then children from the survivor's will — RNRB on second death); tenants in common + IPDI trust (s49A IHTA 1984) can also work (RNRB preserved on IPDI termination — s8H IHTA). (4) Monitor the estate: if asset values push the estate above £2m, consider annual gifting (s19 IHTA), normal expenditure from income (s21 IHTA), or charitable legacies to keep the estate at or below £2m.
AIM BPR for a £2m estate — IHT reduction but not RNRB restoration
Investing in AIM shares qualifying for Business Property Relief (BPR — s105(1)(bb) IHTA 1984) is an excellent IHT planning tool for a £2m estate — but it works very differently from lifetime gifting in terms of the RNRB taper: (1) AIM BPR reduces IHT: £500,000 in AIM BPR qualifying shares (held 2yr+; 100% exempt up to the £1m combined BPR/APR cap from April 2026): the AIM shares are 100% exempt from IHT — effective IHT = 40% on (£2m − £500k AIM − £500k threshold) = 40% × £1m = £400,000 (saving £200,000 vs no BPR). (2) AIM BPR does NOT restore the RNRB: HMRC calculates the RNRB taper on the 'adjusted net estate' (s8F IHTA 1984) which includes the full value of AIM shares BEFORE BPR relief. So a £2.1m estate with £500k in AIM BPR shares: adjusted net estate for taper = £2.1m (above £2m); RNRB tapered; RNRB reduced by £50k; RNRB = £125k (not the full £175k). To restore the full RNRB, the estate must be below £2m based on ACTUAL assets — not just after relief deductions. (3) Combined effect: AIM BPR £500k in a £2.1m estate: IHT = 40% × (£2.1m − £500k AIM − £450k threshold [NRB £325k + tapered RNRB £125k]) = 40% × £1.15m = £460,000. Vs no BPR: 40% × (£2.1m − £450k) = 40% × £1.65m = £660,000. BPR saves £200,000 regardless of the RNRB taper. The RNRB taper cost at £2.1m is modest (40% × £50k reduction = £20k lost vs full RNRB). The overall strategy of BPR + keeping estate below £2m (via lifetime gifts) achieves the best combined result.
Frequently Asked Questions
How much inheritance tax is payable on a £2 million estate?
At exactly £2 million: single person with RNRB (home to children) = £600,000 IHT (40% on £1.5m above the £500,000 threshold). Single without RNRB = £670,000. Married couple with full transferred NRBs and RNRBs (survivor's £2m estate) = £400,000. Couple with transferred NRBs only = £540,000. At exactly £2m, the RNRB taper has not yet triggered — the full RNRB is still available. The taper starts above £2m (s8E IHTA 1984), reducing the RNRB by £1 for every £2 of excess, and the RNRB is fully tapered to £0 for a single person at £2,350,000 or for a couple at £2,700,000.
What is the RNRB taper and how does it affect a £2 million estate?
The RNRB taper (s8E IHTA 1984) reduces the Residence Nil Rate Band by £1 for every £2 by which the net estate exceeds £2,000,000. At exactly £2m: no taper — full RNRB (£175,000 per person; £350,000 combined for a couple using transferred RNRBs) is available. Above £2m: RNRB reduces progressively. Single person at £2.1m: excess £100k; reduction £50k; RNRB = £125k. At £2.35m: RNRB fully tapered to zero; IHT = 40% × £2,025,000 = £810,000. Married couple at £2.7m: both RNRBs fully tapered; threshold = £650,000 (NRBs only); IHT = 40% × £2,050,000 = £820,000.
Does investing in AIM BPR shares help avoid the RNRB taper?
No — investing in AIM BPR qualifying shares reduces the IHT on those shares (100% exempt after 2yr under s105(1)(bb) IHTA 1984) but does NOT reduce the 'adjusted net estate' used to calculate the RNRB taper. HMRC calculates the RNRB taper on the gross estate value under s8F IHTA 1984 — the AIM shares are included at full value before BPR relief. So a £2.1m estate with £500k in AIM BPR shares is still treated as £2.1m for taper purposes: RNRB is still tapered (reduced by £50k). Only actual reductions in the estate value — lifetime gifts (PETs, annual exemption, normal expenditure from income) or charitable legacies — reduce the adjusted net estate below £2m and restore the full RNRB.
How can I reduce my £2 million estate to recover the full RNRB?
Several strategies can reduce a £2m+ estate below the taper threshold: (1) Lifetime PETs (s3A IHTA 1984) — outright gifts to children; IHT-free after 7 years; immediately reduce the estate; if you have an estate of £2.1m, gifting £150,000 to children now (survive 7yr) brings the estate to £1.95m — full RNRB restored; (2) Annual exemption (s19 IHTA) — £3,000/yr immediately exempt; modest but certain reduction; (3) Normal expenditure from income (s21 IHTA) — uncapped, immediate exemption from income surplus; reduces estate progressively; (4) Charitable legacies in the will — unlike BPR, a charitable legacy (s23 IHTA) DOES reduce the adjusted net estate for RNRB taper purposes; leaving enough to charity to bring the net chargeable estate below £2m can restore the full RNRB (professional advice needed on the interaction with s36 IHTA 36% rate). The key: act before the estate exceeds £2m, not after.
Does the RNRB taper apply to the first spouse's death or the second?
The RNRB taper applies separately at EACH death based on the deceased's own estate at that death. On first death: if the first spouse's estate is £2m+, their own RNRB is tapered (and any unused RNRB that would transfer to the survivor is also reduced proportionally). On second death: the survivor's estate is assessed against the £2m taper threshold. The transferred RNRB (IHT436 — s8G IHTA 1984) is calculated based on the unused percentage from first death — if the first spouse's RNRB was fully tapered to zero, there is no transferred RNRB. For most married couples, the first spouse leaves everything to the surviving spouse (spousal exemption — s18 IHTA; RNRB not needed on first death because there's no property passing to direct descendants); the transferred RNRB is therefore 100%. The taper that matters most is at second death. A surviving spouse should monitor their estate — if it grows to £2m+, lifetime planning is needed.
At £2m, the Will Must be Right — or the RNRB is Lost
The RNRB taper makes a correctly drafted will even more critical at larger estates. Directing the home to direct descendants (not a discretionary trust) secures the RNRB and can save up to £140,000 in IHT. WillSafe will kits for England and Wales from £39.99.
View Will Kits from £39.99