Inheritance Tax on the Family Home UK 2026: RNRB, Taper, Joint Ownership, Giving the House Away, and All the Traps
The RNRB gives singles a £500k threshold and widowed people a £1m threshold — but only when the home passes to direct descendants. Giving the house away while living in it does not avoid IHT. And joint tenancy vs tenancy in common is a bigger planning choice than most people realise.
| Situation | RNRB | NRB | Total Threshold | Conditions | IHT Example |
|---|---|---|---|---|---|
| Single person — estate up to £500k | £175,000 RNRB | £325,000 NRB | £500,000 | Qualifying residential property (QRP — s8H IHTA) left to direct descendants (DDs — s8K(3) IHTA). Property must be included in the estate. RNRB capped at the lower of £175k or the value of the QRP in the estate. Property worth less than £175k: RNRB = property value only. | Estate £800k (house £400k, savings £400k), left to children: Chargeable = £800k − £325k NRB − £175k RNRB = £300k × 40% = £120,000 IHT. |
| Single person — estate above £2m (RNRB tapered) | Tapered by £1 for every £2 above £2m (s8E IHTA). Zero at £2.35m. | £325,000 NRB — not tapered | £325k to £500k (depending on estate size and RNRB remaining) | For estates above £2m: RNRB reduces. At £2.1m: RNRB = £175k − (£100k ÷ 2) = £175k − £50k = £125k. At £2.35m: RNRB = £0. NRB remains at £325k regardless of estate size. | Estate £2.2m (house £500k, savings £1.7m), to children: RNRB = £175k − (£200k ÷ 2) = £75k. Chargeable = £2.2m − £325k − £75k = £1.8m × 40% = £720,000 IHT. |
| Widowed — both NRB and RNRB transferred (IHT402 + IHT435) — estate up to £1m | £350,000 (£175k RNRB + £175k tRNRB — both claimed on IHT435) | £650,000 (£325k NRB + £325k tNRB — claimed on IHT402) | £1,000,000 | tNRB: first spouse's NRB must have been unused at first death (full NRB available to transfer). tRNRB: first spouse's RNRB must have been unused at first death (estate did not include QRP to DDs on first death — e.g., property passed to spouse, not children). NEITHER is automatic — executor must actively claim both on IHT402 and IHT435. If first spouse's will had an NRB discretionary trust: tNRB may be partially reduced. | Estate £1.2m (house £500k, savings £700k), to children: Chargeable = £1.2m − £650k − £350k = £200k × 40% = £80,000 IHT. Without tNRB + tRNRB: £1.2m − £325k − £175k = £700k × 40% = £280,000 IHT. Claiming both transfers saves £200,000. |
| Widowed — estate above £2m (RNRB + tRNRB both tapered) | Both RNRB and tRNRB taper. Combined tRNRB + RNRB zero at £2.7m (£2m + 4 × £175k ÷ 2 = £2m + 4 × £87.5k... actually: taper is £1 per £2 above £2m on combined tRNRB + RNRB = £350k. Fully tapered at £2m + 2 × £350k = £2.7m). | £650k (NRB + tNRB — not tapered) | £650k to £1m depending on estate size | The taper applies to the combined RNRB and tRNRB. For a widowed person: taper begins at £2m; each £2 above £2m reduces the combined £350k RNRB + tRNRB by £1. At £2.7m: RNRB + tRNRB = £0. Only NRB + tNRB = £650k remains. | Estate £2.5m widowed: RNRB + tRNRB = £350k − (£500k ÷ 2) = £350k − £250k = £100k. Chargeable = £2.5m − £650k − £100k = £1.75m × 40% = £700,000 IHT. |
| Downsizing — sold or downsized qualifying home after 8 July 2015 | Downsizing addition (s8FA IHTA): preserves the RNRB that would have applied on the former property. Estate must include other assets (not necessarily property) left to DDs equal to the downsizing addition. | £325k (or £650k widowed) | As if the original property were still owned | The downsizing addition is calculated based on the RNRB that would have been available on the former (larger) property at the date of the deceased's death. The estate must include assets of at least the downsizing addition value passing to DDs (the 'brought-forward amount'). If the estate is all cash or investments left to children: the downsizing addition applies even though there is no property in the estate at death. | Mr Jones owned a £500k house (used full RNRB). Sold and moved to care home. At death: estate = £400k cash; no property. Without downsizing provisions: RNRB lost. With s8FA: downsizing addition = £175k (full RNRB on former property). If £175k+ left to children from the £400k cash estate: full RNRB of £175k preserved. Chargeable = £400k − £325k − £175k = £0 IHT. |
| Property NOT passing to direct descendants — RNRB lost | £0 — RNRB is ONLY available if QRP passes to direct descendants. If property passes to a sibling, nephew, niece, friend, or charity: no RNRB. | £325k (NRB always available regardless of who inherits) | £325k | RNRB requires: (1) deceased owned a qualifying residential property (or former property — see downsizing); AND (2) QRP (or downsizing equivalent assets) passes to direct descendants (children, step-children, adopted/foster children, grandchildren, great-grandchildren, and their spouses/CPs/widowed spouses — s8K(3) IHTA). If either condition fails: no RNRB. A will leaving the house to a sibling or to a discretionary trust (with non-DD beneficiaries) loses the RNRB. | Estate £800k; house £400k left to sibling; savings £400k left to children. RNRB: £0 (QRP not passing to DDs). Chargeable = £800k − £325k = £475k × 40% = £190,000 IHT. Vs if house left to child: £800k − £325k − £175k = £300k × 40% = £120,000. Difference = £70,000. |
IHT on family home UK 2026. RNRB (Residence Nil Rate Band): ss8D-8K IHTA 1984 (Finance Act 2016, operative from 6 April 2017). £175,000 per person in 2026/27. Qualifying Residential Property (QRP — s8H IHTA): must have been a UK residential property that was the deceased's home at some point; freehold or leasehold. Direct Descendants (DDs — s8K(3) IHTA): lineal descendants (children, grandchildren, great-grandchildren); step-children; adopted children; fostered children; and their current/former spouses, CPs, widowed spouses. RNRB taper (s8E IHTA): £1 RNRB lost per £2 of adjusted net estate (s8E(5) — net estate before RNRB) above £2,000,000. Single taper complete at £2,350,000. tRNRB + RNRB (widowed) taper complete at £2,700,000. tNRB: s8A IHTA — IHT402 claim (NOT automatic); executor must file IHT402; first spouse's NRB must have been unused at first death. tRNRB: s8G IHTA — IHT435 claim (NOT automatic); first spouse's RNRB must have been unused at first death (QRP did not pass to DDs). RNRB capped at the lesser of £175k or the value of QRP passing to DDs (s8H(2)). Downsizing (s8FA-8FE IHTA): property sold/downsized after 8 July 2015; downsizing addition; estate must include assets of at least downsizing addition passing to DDs; IHT435 claim. GWR (Gift with Reservation — s102-s102C FA 1986): donor retains benefit; no PET; 7yr clock does NOT run; property in estate at death regardless. POAT (Pre-Owned Asset Tax — FA 2004 Sch 15): income tax charge where GWR has been avoided but donor still benefits. Market rent paid: removes GWR taint. Joint tenancy: survivorship; property passes to survivor regardless of will; no planning on first death for property. Tenancy in common: share passes via will; NRB DT possible on first death. Severance of joint tenancy: written notice; registered at HMLR. IPDI (Immediate Post-Death Interest — s49A IHTA): life tenant treated as owning assets (s49(1)); RNRB available on life tenant's death if QRP passes to DDs (s8H(4)). Discretionary trust: generally NOT a DD; loses RNRB (unless disabled beneficiary is DD — s89 IHTA). NRB: £325k. IHT rate: 40% on excess above thresholds. Spousal exemption: s18 IHTA — unlimited between UK dom spouses/CPs. IHT435: RNRB/tRNRB claim form (separate from main IHT400). IHT402: tNRB claim form.
IHT on the Family Home: Complete Guide
The family home and IHT — understanding the core question
The family home is typically the largest single asset in a UK estate. For the majority of estates facing IHT, the property element is the most significant driver of both the IHT liability and the planning choices. At current UK house prices, a family home alone can push many estates above the IHT threshold. The Residence Nil Rate Band (RNRB) — introduced by Finance Act 2016, operative from 6 April 2017 — was specifically designed to protect the family home from IHT for most estates. For a single person leaving a qualifying home to children or grandchildren: the combined NRB + RNRB provides a £500,000 threshold before any IHT is due. For a widowed person claiming both the transferred NRB and transferred RNRB: the combined threshold is £1,000,000. These are significant protections for typical UK families. But the RNRB is not unconditional: it requires the property to pass to 'direct descendants' (a specific statutory definition — s8K(3) IHTA); it tapers to zero for larger estates; it has specific conditions about the property's position in the estate; and it does not apply to property left to anyone other than direct descendants. Understanding exactly who qualifies as a direct descendant, and how to ensure the will is structured to claim the RNRB, is one of the most important IHT planning steps for the average UK family.
Giving the house away — the Gift with Reservation trap
One of the most common 'DIY' IHT strategies is parents giving the family home to their children during their lifetime, with the intention of starting the 7yr PET clock and removing the house from the IHT estate. In most cases, this does not work due to the Gift with Reservation rules (s102-s102C Finance Act 1986). A Gift with Reservation (GWR) occurs when: the parent gives away an asset (e.g., the house) BUT retains a benefit in it — typically by continuing to live in the house rent-free. If GWR applies: the 7yr clock does NOT run; the property stays in the donor's estate at date-of-death market value regardless of when the 'gift' was made; the gift is NOT a PET at all. To avoid GWR on a property gift: the donor must pay FULL MARKET RENT to the donee (the child) and stop receiving the benefit. In practice: parents would pay market rent to children for living in their own home. This is administratively complex, tax-inefficient for the children (rental income taxable), and psychologically difficult. Additional trap: even if GWR is subsequently cured by paying market rent, the Pre-Owned Asset Tax (POAT — Finance Act 2004 Sch 15) may apply as an annual income tax charge for the period when the benefit was retained. For most families: gifting the house during lifetime while continuing to live in it simply does not work as an IHT strategy.
Joint tenancy vs tenancy in common — the IHT implications
How the family home is owned between spouses or civil partners has significant IHT consequences: JOINT TENANCY — survivorship operates automatically on the first death. The surviving spouse inherits the entire property regardless of what the will says. IHT on first death: nil (property passes to spouse → s18 IHTA unlimited spousal exemption for UK domiciled spouses). IHT on second death: the full property is in the surviving spouse's estate. Downside: no planning opportunity is available on the first death for the property — all of the property will be in the second spouse's estate. NRB Discretionary Trust planning on the first death cannot include a share of the property. TENANCY IN COMMON — each owner holds a specific share (typically 50/50, though any split is possible). On first death: the deceased's share passes via their will — it does NOT pass automatically to the survivor. This enables NRB planning on first death: the deceased's 50% share can be left to an NRB Discretionary Trust (up to NRB £325k) or directly to children, utilising the NRB on the first death. On second death: only the surviving spouse's 50% share is in their estate (plus any other assets). The RNRB applies if the second spouse's share passes to direct descendants. Converting from joint tenancy to tenancy in common: done by a 'severance of joint tenancy' — written notice signed by one party to the other; registered at HM Land Registry. This is a simple process but should be done in conjunction with reviewing the wills of both spouses.
The RNRB and direct descendants — who qualifies and who does not
The RNRB is only available if the qualifying residential property (or the estate assets via downsizing provisions) passes to 'direct descendants' — a specific statutory definition under s8K(3) IHTA 1984. WHO QUALIFIES AS A DIRECT DESCENDANT: lineal descendants (children, grandchildren, great-grandchildren, and further descendants); step-children (spouse or civil partner's children — even without formal adoption); adopted children; fostered children (if the deceased had been a foster parent); and the current/former spouses or civil partners of any of the above (including widowed spouses who have not remarried). WHO DOES NOT QUALIFY: siblings, nephews, nieces, cousins, friends, parents, charities. A discretionary trust where the beneficiaries include non-qualifying persons (e.g., the settlor's sibling) will not qualify for the RNRB — the trust is not a 'direct descendant' within s8K. EXCEPTION: a disabled person's trust (s89 IHTA) where the disabled beneficiary is a direct descendant — can qualify. Also: an IPDI (Immediate Post-Death Interest — s49A IHTA) where the life tenant IS a direct descendant: the RNRB applies against the settled property from the life tenant's estate (s8H(4) IHTA). PRACTICAL CHECK: before finalising any will, confirm that: (1) the property in the estate qualifies as a QRP (s8H — must have been the deceased's residence at some point; must be within the UK — freehold or leasehold); (2) the beneficiaries of the property (or estate assets via downsizing) are within the s8K(3) direct descendant definition; (3) the RNRB claim (IHT435) is completed accurately — it is NOT automatic.
Frequently Asked Questions
Do you pay inheritance tax on the family home?
Inheritance tax may be due on the family home depending on the total estate value. If the estate (including the home) exceeds the available IHT thresholds: IHT at 40% applies to the excess. Thresholds in 2026/27: Single person leaving home to children: NRB £325k + RNRB £175k = £500,000 total threshold. Widowed person (claiming tNRB + tRNRB via IHT402 + IHT435 — NOT automatic): tNRB £325k + NRB £325k + tRNRB £175k + RNRB £175k = £1,000,000 total threshold. The RNRB (Residence Nil Rate Band — s8D IHTA 1984) is only available if: (1) the qualifying residential property (s8H IHTA) was the deceased's home at some point; (2) it passes to direct descendants (s8K(3) IHTA — children, step-children, grandchildren etc.). RNRB taper: reduces by £1 per £2 above £2m net estate (zero at £2.35m single / £2.7m widowed — s8E IHTA).
Can you give your house to your children to avoid inheritance tax?
Giving the family home to children during lifetime (as a lifetime gift/PET) is unlikely to work as an IHT strategy if the parents continue living in the property rent-free. The Gift with Reservation rules (s102-s102C Finance Act 1986 — GWR) mean: if the parents give away the house but retain a benefit (living rent-free), the property stays in their estate for IHT at death — regardless of when the gift was made. The 7yr PET clock does NOT run on a GWR. To avoid GWR: the parents must pay FULL MARKET RENT to the children (and stop receiving rent-free benefit). This is complex and rare in practice. Even paying market rent: Pre-Owned Asset Tax (POAT — Finance Act 2004 Sch 15) may apply for the earlier period. ALTERNATIVE: leaving the house via a will to direct descendants claims the RNRB (up to £175k additional threshold) — a simpler and safer approach for most families.
What is the Residence Nil Rate Band (RNRB) and how does it apply to the family home?
The Residence Nil Rate Band (RNRB — ss8D-8K IHTA 1984) provides an additional IHT threshold of up to £175,000 (2026/27) when a qualifying residential property (QRP — s8H: must be or have been the deceased's UK residential property) passes to direct descendants (DDs — s8K(3): children, step-children, adopted/foster children, grandchildren, great-grandchildren, and their spouses/CPs/widowed spouses). The RNRB stacks on top of the NRB (£325k): single person = £500k total threshold. For widowed: tRNRB and tNRB can both be transferred from the first spouse's unused allowances (IHT435 + IHT402 — both must be actively claimed; neither is automatic): combined £1m threshold. Taper (s8E): RNRB reduces by £1 per £2 of estate above £2m; zero at £2.35m (single). Downsizing (s8FA): if the QRP was sold after 8 July 2015, the RNRB is preserved via a downsizing addition.
Joint tenancy or tenancy in common — which is better for inheritance tax?
For IHT planning purposes: tenancy in common is generally more flexible than joint tenancy. JOINT TENANCY: the property passes to the surviving co-owner automatically on first death (survivorship) — regardless of the will. For married couples: IHT-free on first death (s18 IHTA spousal exemption). But no NRB planning opportunity on first death for the property. Full property in the surviving spouse's estate on second death. TENANCY IN COMMON: each owner's share passes via their will. On first death: the deceased's share can be left to children or an NRB discretionary trust (s8H IHTA — if within NRB, the RNRB can still apply if the share passes to DDs). On second death: only the surviving spouse's share is in their estate. Converting from joint tenancy to tenancy in common: a written 'severance of joint tenancy' notice (one party to the other) registered at HM Land Registry. Should be accompanied by will review for both spouses. No SDLT or CGT consequences for a severed joint tenancy between spouses.
What is the RNRB downsizing provision and when does it help?
The RNRB downsizing provision (s8FA-s8FE IHTA 1984) prevents the loss of the RNRB when a person has sold or downsized their home after 8 July 2015. Without this provision: someone who sells their home (e.g., to move into a care home or to buy a smaller property) would lose the RNRB entirely at death, since no qualifying residential property remains in their estate. With the downsizing addition: the RNRB that would have been available on the former (larger) property is preserved — calculated as if the former property were still owned at date of death. The estate must include other assets (not necessarily property) of at least the downsizing addition value passing to direct descendants. Example: person sells £600k house; moves into £250k flat; later dies. RNRB on £600k house = £175k (capped at £175k). Downsizing addition = £175k. If £175k+ passes to children from the remaining estate (cash, investments etc.): full £175k RNRB is preserved. Executor claims via IHT435.
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