Leaving Property to Children UK IHT: RNRB, How It Works, Who Qualifies, and What Goes Wrong (2026)
The £175,000 Residence Nil-Rate Band reduces IHT by up to £70,000 — but only if the property passes to children directly or via an IPDI trust. Leave it to a discretionary trust and the RNRB is lost. Older wills with NRB trust clauses frequently make this mistake.
| Method of Passing Property | RNRB Available? | Example | Does NOT Qualify |
|---|---|---|---|
| Leave property absolutely to children in the will (outright gift) | YES — the simplest and most straightforward route to the RNRB. The will should specifically name the residential property and leave it to the children (or grandchildren, step-children, etc.) outright. | Will says: 'I give my property at [address] to my children [names] in equal shares.' Children take the property as tenants in common; RNRB applies up to £175k (or property value if less). Probate transfers the property to the children's names. CGT: children's base cost = probate value (s62(1) TCGA 1992). If children sell immediately: no CGT. If children sell years later: CGT on growth above probate value at 18% (basic rate) or 24% (higher rate) on residential property from April 2024. | No restrictions for this method — provided the property was one the deceased had a right to reside in at some point (s8H IHTA qualifying condition). |
| Leave property via IPDI trust (Immediate Post-Death Interest — s49A IHTA 1984) | YES — an IPDI is a trust created by the will where a beneficiary (the lineal descendant) has an immediate entitlement to the income from the trust (or the right to occupy the property). The IPDI trustee holds the legal title; the lineal descendant has the beneficial interest immediately. The RNRB is available because the lineal descendant has a qualifying interest in possession within s49A IHTA. | Will creates a trust for the property. Spouse has a right to live in the property for life (life interest / IPDI). Children take the remainder interest. First death: RNRB NOT available (property going to spouse via IPDI — spouse is not a lineal descendant for RNRB purposes). But tRNRB (s8G IHTA) may be available at second death if the first spouse's RNRB was unused. Second death: RNRB available when property passes to children under the trust terms (they are lineal descendants). | IPDI for the surviving SPOUSE does NOT trigger RNRB at the FIRST death — because the spouse is not a 'lineal descendant' of the deceased. The RNRB requires the lineal descendant to be immediately entitled under the IPDI. Spouse IPDI → RNRB at first death: not available. Spouse receives property via spousal exemption (s18 IHTA) → tRNRB claimable at second death (s8G IHTA) if properly structured. |
| Leave property to a discretionary trust (even if all beneficiaries are children) | NO — even if the entire class of discretionary trust beneficiaries consists of the deceased's children and grandchildren, the RNRB does NOT apply. A discretionary trust gives beneficiaries no immediate qualifying interest in possession — the trustees have discretion over who benefits and when. The RNRB requires the property to be 'closely inherited' — passed to a lineal descendant who has an immediate entitlement (absolutely or via IPDI). | Will leaves the house to 'trustees to hold on trust for my children and grandchildren at the trustees' discretion.' Despite children and grandchildren being the beneficiaries: RNRB = NOT available. IHT saving lost: £175k × 40% = £70k (or £350k × 40% = £140k for widowed person losing both RNRB and tRNRB). This is one of the most common drafting mistakes in older wills — particularly where the NRB discretionary trust clause was added years ago and now includes the property. | Discretionary trust: NO RNRB regardless of who the beneficiaries are. Solution: update the will to leave the property absolutely to the children (outright gift) or via IPDI (immediate entitlement for the children), NOT via a discretionary trust. This is a simple will amendment but can save £70k-£140k in IHT. |
| Leave property to surviving spouse or civil partner (directly or via IPDI for spouse) | NO at first death (RNRB for the first spouse to die). YES at second death (RNRB and tRNRB for the surviving spouse's estate — if conditions met). At first death: the property passes to the spouse (s18 IHTA spousal exemption — zero IHT). The first spouse's RNRB is unused. Under s8G IHTA (tRNRB), the unused RNRB from the first death is transferred to the second estate — available when the property (or equivalent downsizing assets) passes to lineal descendants at the second death. | First death: house worth £300k left to spouse (IPDI or absolutely). RNRB at first death: not used (spouse is not a lineal descendant of deceased). Unused RNRB = £175k → tRNRB available at second death. Second death: surviving spouse dies; house (now £350k) passes to children absolutely or via IPDI. RNRB at second death: £175k (own RNRB). tRNRB from first death: £175k (transferred unused RNRB — IHT436). Total residential threshold at second death: £350k. Combined with tNRB + NRB: £350k + £650k = £1m combined threshold. | tRNRB requires: (1) first spouse's RNRB was NOT fully used at first death; (2) executor of second estate files IHT436 (NOT automatic — if not filed, tRNRB lost). If the first spouse's will had a NRB discretionary trust including the property, the RNRB at the first death may have been partially used or lost. |
| Downsizing allowance — sold property or moved to smaller home (s8FA-8FE IHTA) | YES — if the deceased sold or downsized their property after 8 July 2015 and at least the equivalent value of assets was left to lineal descendants in the will (or passed under intestacy to lineal descendants), the RNRB is still claimable via the 'downsizing allowance' — up to the amount of RNRB that would have been available on the sold/downsized property. | Deceased sold a £250k home in 2018 (downsizing allowance threshold property value: £250k; RNRB: £175k). Moved to rental. Estate at death (2026): investments £500k; no property. Will leaves all investments to children. Downsizing allowance: RNRB = min(£175k, £250k) = £175k — full RNRB available because the property value (£250k) was above the RNRB (£175k). IHT saving: £175k × 40% = £70k vs no downsizing allowance. | Downsizing allowance must be CLAIMED (not automatic) on IHT400 with supporting evidence. Property sold BEFORE 8 July 2015: NOT eligible for downsizing allowance. Property sold AND the equivalent value was spent (not retained): the assets left to lineal descendants must be at least as valuable as the property sold, for the full RNRB to be preserved. |
| Property owned jointly (JT or TIC) — only deceased's share counts for RNRB | PARTIAL — only the deceased's share of jointly owned property qualifies for RNRB purposes. Joint tenancy (JT): the deceased's share passes by survivorship to the co-owner (not into the estate) — the JT share is NOT 'in the estate' and therefore NOT 'closely inherited' → RNRB NOT available on the JT share. Tenancy in common (TIC): the deceased's share IS in the estate; if it passes to lineal descendants → RNRB available on that share. | 50% TIC property worth £600k total. Deceased's 50% = £300k. Passes to children under will. RNRB: min(£175k, £300k) = £175k available (the property value for RNRB purposes is £300k — the deceased's share). If property value was £200k total and deceased owned 50% = £100k: RNRB capped at £100k (property value) — s8H(2) IHTA. JT property: passes by survivorship; NOT in estate; RNRB not applicable on JT share (because it doesn't pass under the will at all). | JT share passing by survivorship: RNRB not available on that share because it does not 'closely inherit'. To use the RNRB on jointly owned property: sever the joint tenancy to TIC (notice of severance under s196 LPA 1925) and ensure the TIC share passes to lineal descendants under the will. |
RNRB UK 2026. RNRB: s8D IHTA 1984 — £175,000 for 2026/27; additional IHT threshold when qualifying residential property passes to lineal descendants. Qualifying residential property: s8H IHTA — property where deceased had right to reside at some point; capped at property value if property value less than £175k (s8H(2) IHTA). Lineal descendants: s8K IHTA — biological children; adopted children; step-children (step-parent married/CP to natural parent); foster children (in care of deceased); grandchildren; great-grandchildren. Closely inherited: s8J IHTA — passes absolutely or via IPDI (s49A IHTA 1984). IPDI: immediate post-death interest — lineal descendant has immediate right to income/occupation. Discretionary trust: RNRB NOT available even if all beneficiaries are lineal descendants. tRNRB: s8G IHTA — transferred unused RNRB from first spouse/CP; claimed on IHT436 (NOT automatic). RNRB taper: s8E IHTA — £1 per £2 ANE above £2m; RNRB = £0 at £2.35m ANE. Downsizing allowance: s8FA-8FE IHTA — sold/downsized property post-8 July 2015; assets left to lineal descendants ≥ sold property value; must be claimed. JT: survives by right of survivorship; NOT in estate; RNRB not applicable. TIC: deceased's share in estate; RNRB applicable if passing to lineal descendants. JT severance: s196 LPA 1925 written notice. CGT: s62(1) TCGA 1992 — probate value = CGT base cost; no CGT at death; child's gain = above probate value. CGT on residential property rates: 18% basic; 24% higher (from April 2024). Main residence relief: s222 TCGA 1992 — if child occupies as main residence before sale. NRB discretionary trust clauses in older wills: causes loss of RNRB; update will urgently.
Property to Children and RNRB: Complete Guide
Who counts as 'children' for the Residence Nil-Rate Band?
The RNRB (s8D IHTA) requires the property to pass to 'lineal descendants' — a specific legal term defined in s8K IHTA 1984. Lineal descendants include: (1) biological children of the deceased, including children born outside of marriage; (2) adopted children (legally adopted, including step-adoptions); (3) step-children — but only if the step-parent was married or in a civil partnership with the step-child's natural parent (a cohabiting step-parent's step-children may not qualify — the statutory definition requires the step-parent relationship to arise through marriage or civil partnership); (4) foster children who were being cared for by the deceased under a foster care arrangement; and (5) grandchildren and remoter descendants (e.g., great-grandchildren) of the above. NOT lineal descendants: (a) nieces and nephews (children of siblings); (b) siblings; (c) cousins; (d) friends and godchildren; (e) step-children of the deceased's own children (i.e., grandchildren by step-relationship are complex — specialist advice needed). The RNRB is not available if the only beneficiaries of the property are not lineal descendants — for example, if the will leaves the house to a sibling, a nephew/niece, or a charity: the RNRB is lost. For those with no children or lineal descendants, the RNRB is unavailable — and the maximum threshold is NRB + tNRB = £650k (for a widowed person) or NRB £325k (for a single person).
Why the discretionary trust clause in older wills destroys the RNRB
Many wills drafted before 2007 (and some after) contain a 'nil-rate band discretionary trust' or 'property protection trust' clause. These were often inserted to: (1) ensure the NRB was used at the first death (before tNRB was available from 2007); (2) protect the family home from care home fees assessments. However, these clauses often direct the residential property (or a share of it) into a discretionary trust on the first death — and a discretionary trust does NOT qualify for the RNRB, even if all the beneficiaries are children. The result: the RNRB (£175k at first death; tRNRB £175k at second death) can both be lost — an unnecessary IHT cost of up to £140k for a couple with a £1m estate. The fix is simple but requires updating the will: replace the discretionary trust with either (a) an absolute gift to the children directly, or (b) an IPDI for the surviving spouse (which preserves the RNRB at the second death when the property passes from the IPDI trust to the children). Any will containing a discretionary trust clause that may include property should be reviewed by a solicitor specialising in wills and estates. This is particularly important for wills signed before 2007 — they were drafted in a different legal environment and often create significant unnecessary IHT problems.
The downsizing allowance — RNRB even if you no longer own a home at death
The downsizing allowance (ss8FA-8FE IHTA 1984, introduced by Finance Act 2016) allows the RNRB to be claimed even if the deceased does not own a qualifying residential property at the date of death — provided certain conditions are met. The conditions: (1) the deceased sold, transferred, or downsized a qualifying residential property (one they had a right to reside in) on or after 8 July 2015; (2) the property sold was worth at least as much as the RNRB at the time (otherwise the RNRB is limited to the property value); (3) assets of at least equivalent value to the sold property are 'closely inherited' by lineal descendants under the will (or intestacy). The downsizing allowance calculation: the RNRB available = the lesser of (a) the RNRB that would have been available on the sold/downsized property, and (b) the value of the assets actually left to lineal descendants. Example: person sold a £500k home in 2020 (worth more than the RNRB). At death in 2026, they have no property — just £300k savings. Will leaves everything to children. Downsizing allowance = £175k (the full RNRB) — because the sold property value (£500k) exceeded the RNRB (£175k), and the assets left to children (£300k) exceed the RNRB (£175k). The downsizing allowance must be CLAIMED — it is not automatic. IHT400 with RNRB schedule (part of the IHT407 or similar) must evidence the claim. Executors must identify the prior property, confirm the sale date (8 July 2015+), and show the value of assets closely inherited.
CGT when children inherit property — the uplift to probate value
When a child inherits property from a parent's estate, there is NO Capital Gains Tax (CGT) charge at the date of death. The property passes to the beneficiary at its probate value (market value at the date of death) as the CGT base cost (s62(1) TCGA 1992 — 'uplift' or 'free uplift'). This CGT rebasing means: if the deceased bought a house for £100k and it is worth £600k at death, the entire £500k gain during the deceased's lifetime is wiped out for CGT purposes — the child takes the house at a £600k base cost. If the child then sells the house: CGT is only charged on the growth ABOVE £600k (the probate value). Rates: CGT on residential property = 18% (basic rate taxpayer) or 24% (higher rate taxpayer) from April 2024 — reduced from the previous 28% higher rate. Main residence relief (PRD — s222 TCGA): if the child moves into the inherited property and makes it their main residence before selling, they may qualify for full or partial PRD on any subsequent sale. Annual CGT exemption: £3,000 per person per year from April 2024. The IHT/CGT tradeoff: for an estate with a large property gain, there is sometimes a planning choice between (a) maximising IHT reliefs (e.g., leaving the property to lineal descendants to claim RNRB — IHT saving: up to £70k) versus (b) holding back from giving the property away during life to preserve the CGT free uplift at death. For most estates, the CGT free uplift at death is a significant benefit — giving property away during life triggers CGT at the time of the gift (at market value) unless holdover relief applies.
RNRB planning checklist — ensuring the full benefit is available
To maximise the RNRB (and tRNRB) for an estate with a qualifying residential property: (1) Review the will: does it leave the property absolutely to children, or does it direct the property into a discretionary trust? If a discretionary trust: update the will to leave the property to children directly or via an IPDI. (2) Check the RNRB cap: is the property value at least £175k? If not, the RNRB is capped at the property value — consider whether other IHT planning is needed. (3) Check the taper: is the estate above £2m? If so, calculate the taper and consider actions to reduce the adjusted net estate below £2m (charitable bequest; lifetime gifts). (4) For widowed persons: has the executor of the first spouse's estate filed IHT421 and preserved the tRNRB entitlement? File IHT436 for the second estate. (5) For those with no property at death: check whether the downsizing allowance applies (property sold after 8 July 2015; assets left to lineal descendants). (6) For property in trust: is it an IPDI (qualifies for RNRB) or a discretionary trust (does not qualify)? (7) For jointly owned property: is it JT (RNRB not available on JT share) or TIC (RNRB available on TIC share if passing to lineal descendants)? Consider severing JT to TIC (notice under s196 LPA 1925). (8) Check step-children: are they covered by the s8K IHTA definition? Was there a marriage or civil partnership to the natural parent? (9) File IHT402 for tNRB and IHT436 for tRNRB when administering the second estate — both are NOT automatic; both must be actively claimed.
Frequently Asked Questions
Do I get a tax break on inheritance tax if I leave my house to my children?
Yes — the Residence Nil-Rate Band (RNRB — s8D IHTA 1984) gives an extra IHT threshold of £175,000 (2026/27) when a qualifying residential property passes to lineal descendants (children, grandchildren, step-children, etc. — s8K IHTA). This reduces IHT by up to £175,000 × 40% = £70,000 for a single person. For a widowed person claiming both RNRB and tRNRB: £350,000 × 40% = £140,000 saving. Conditions: (1) qualifying residential property (a home you lived in at some point — s8H IHTA); (2) passes to lineal descendants absolutely (outright gift in will) or via IPDI trust (s49A IHTA); (3) NOT to a discretionary trust; (4) estate below £2.35m (for full RNRB) — taper applies above £2m.
Can I leave my house to grandchildren and still get the RNRB?
Yes — grandchildren are lineal descendants under s8K IHTA 1984, and the RNRB is available if the property passes to them. The property can be left to grandchildren absolutely (outright gift in the will) or via an IPDI trust (s49A IHTA). The RNRB is NOT available if the property passes to a discretionary trust, even if the beneficiaries are grandchildren. Skipping a generation (leaving directly to grandchildren) can also be IHT-efficient because it reduces the children's own eventual estate — preventing the property being taxed again on the children's death. Note: CGT position for grandchildren is the same as for children — they take the property at probate value as their base cost (CGT free uplift at death — s62(1) TCGA 1992).
Does the RNRB apply if the house is in a trust?
Only if it is an IPDI trust (Immediate Post-Death Interest — s49A IHTA 1984). An IPDI is a trust created by the will where a lineal descendant (child, grandchild, etc.) has an immediate right to the income from the trust or the right to occupy the property. The RNRB is available because the lineal descendant has an immediate qualifying interest in possession. A DISCRETIONARY trust does NOT qualify for the RNRB, even if all the beneficiaries are children. This is one of the most common reasons the RNRB is lost — a property left to a 'family trust' or 'nil-rate band discretionary trust' by an older will does not qualify. If your will contains a discretionary trust clause, review it urgently with a solicitor.
What if I've sold my house — can I still claim RNRB for my children?
Potentially yes — through the downsizing allowance (ss8FA-8FE IHTA 1984). If you sold a qualifying residential property on or after 8 July 2015 and your will leaves assets of at least equivalent value to lineal descendants (children, grandchildren, etc.), you can claim the RNRB based on the sold property value. The downsizing allowance must be actively claimed on IHT400 — it is not automatic. Example: sold home worth £300k in 2020; now have investments of £300k; will leaves all to children. Downsizing allowance = £175k (full RNRB, because property value £300k > RNRB £175k, and assets to children £300k > RNRB £175k). If the sold property was worth less than £175k, the RNRB is capped at the sold property value.
Do step-children qualify for the RNRB?
Yes — step-children are lineal descendants under s8K IHTA 1984, provided the step-parent relationship arose through marriage or civil partnership to the step-child's natural parent. A cohabiting step-parent (not married or in a civil partnership to the natural parent) may not qualify under the statutory definition — specialist advice is needed in this case. The definition in s8K IHTA includes: children; step-children where the step-parent was married/CP to the natural parent; adopted children; foster children who were under the care of the deceased. The RNRB is available when the qualifying residential property passes to any of these lineal descendants under the conditions described above. Foster children: the foster carer (deceased) must have been formally fostering the child — not informally caring for them.
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