Leaving Your House to Your Children UK (2026): Wills, IHT and the RNRB

Leaving the family home to your children in your will is one of the most common estate planning goals in England and Wales. The mechanism depends on how the property is owned: (1) PROPERTY OWNED AS JOINT TENANTS: if you own the property as joint tenants with a spouse or partner, the property does NOT pass via the will at all — it passes automatically to the surviving co-owner by right of survivorship. This is independent of the will. The surviving co-owner then owns 100% of the property and can leave it to the children in their own will; (2) PROPERTY OWNED AS TENANTS IN COMMON: if the property is held as tenants in common (each owner holds a defined share — typically 50/50 but can be any split), each owner's share DOES pass via their will. A tenants in common co-owner can leave their share directly to children. The surviving co-owner retains their own share; (3) PROPERTY OWNED SOLELY: property in your sole name passes via your will. You can leave it outright to children, to a life interest trust (surviving spouse has right to live there for life; children inherit on second death), or to other beneficiaries; (4) HOW TO STATE IT IN THE WILL: a specific bequest: 'I give my property at [address] to my children in equal shares'. Or via the residuary clause: 'I give my residuary estate to my children in equal shares' — if the house forms part of the residue, the children receive it along with other assets. For RNRB purposes, the house must pass to a direct descendant — this can be via a specific gift, residuary gift, or a qualifying trust in the will; (5) JOINT OWNERSHIP AND SURVIVORSHIP: the most important point for married couples with children is that most family homes are held as joint tenants, so the home passes to the surviving spouse on first death (regardless of the will). The surviving spouse then leaves it to the children on second death. This is typically fine — the RNRB is available on the second death (and the transferable RNRB from the first death, if unused, is also available). Only change joint tenancy to tenants in common if there is a specific reason (e.g. a second marriage; creditor protection; IHT planning for a very large estate).

The Residence Nil-Rate Band (RNRB) is an additional IHT allowance specifically designed for passing the family home to direct descendants. Key rules: (1) THE AMOUNT: £175,000 per person (frozen until 2030). Combined with the standard NRB of £325,000, an individual can potentially pass £500,000 tax-free to children. A married couple with both RNRB and NRB (and both transferable): up to £1,000,000; (2) QUALIFYING CONDITIONS: (a) The deceased must have owned a qualifying residential interest — a property they currently own, or have owned in the past (for the downsizing allowance), which has been their residence at some point; (b) The property (or the assets derived from a sale/downsizing) must pass to a direct descendant or to a trust from which a direct descendant benefits; (c) DIRECT DESCENDANT (IHTA 1984 s.8K): includes the deceased's children (biological, adopted, stepchildren, fostered children), the children's spouses and civil partners (in specific circumstances), and further lineal descendants (grandchildren, great-grandchildren etc). Stepchildren (including step-grandchildren) are specifically included. Nephews, nieces, siblings, and friends are NOT direct descendants; (3) QUALIFYING TRUST: the property can pass via a qualifying trust and still benefit from RNRB — provided the trust has an 'immediate post-death interest' (the beneficiary has a present, unconditional entitlement to income from the trust) or is an 18-25 trust (s.71D IHTA 1984) or a bereaved minor trust (s.71A). A standard discretionary trust does NOT qualify; (4) TAPER: the RNRB reduces by £1 for every £2 the net estate exceeds £2 million. For a £2m estate, full RNRB available. For a £2.35m estate, RNRB is eliminated; (5) NOT AVAILABLE FOR: assets passing to siblings, friends, charities, or non-qualifying trusts. Buy-to-let properties that have never been the deceased's residence also do not qualify.

Many people consider giving their home to their children while alive to reduce IHT, rather than leaving it via a will. The two approaches have very different consequences: (1) LEAVING VIA WILL: (a) Capital Gains Tax: there is NO CGT on death. The inheriting children take the property at the probate value — their base cost for any future CGT calculation is the market value at the date of death. Any gain that accrued during the parent's lifetime is wiped; (b) SDLT: there is no Stamp Duty Land Tax when property passes on death by inheritance; (c) IHT: the property forms part of the estate and is subject to IHT at 40% on value above the NRBs (including RNRB if conditions met); (d) Occupation: the parent retains the right to live in the property until death; (2) LIFETIME GIFT: (a) CGT: a gift is a disposal for CGT purposes. The parent is treated as selling at market value. CGT is chargeable on the gain from the original base cost to the market value at the date of gift. Rates: 18% or 24% (residential property; lower/higher rate). Main Residence Relief may eliminate CGT if the property has been the parent's main home throughout ownership — check with a tax adviser for partial relief situations; (b) SDLT: no SDLT is payable by the donee (child) on receiving the property as a gift. But if the property has a mortgage, SDLT may be payable on the amount of the mortgage taken over (treated as consideration); (c) IHT — GIFT WITH RESERVATION (IHTA 1984 s.102): if the parent gives the property away but continues to live there rent-free (or at less than market rent), this is a 'gift with reservation'. The property remains in the parent's estate for IHT as if the gift had never been made. The GWR rule prevents the most common attempted tax avoidance — giving the house to children to escape IHT while continuing to live there; (d) PET: if the parent moves out and pays a market rent, the gift becomes a PET. If the parent survives 7 years, the gift is IHT-exempt. But paying market rent may not be practical for most families; (3) PRE-OWNED ASSETS TAX (POAT): introduced in 2005, POAT is an income tax charge on the annual benefit received from using an asset that has been given away. If a parent gives a house to a child but continues to live there, POAT applies annually on the rental value of the property. The parent can elect to revert to the GWR regime (IHT inclusion) instead; (4) CONCLUSION: for most families, leaving the house via the will is simpler, avoids CGT, avoids GWR complications, and achieves the RNRB. Lifetime gifts are complex, carry CGT risk, and require genuine occupation change to be effective.

This is one of the most practically important situations in estate planning for families with children: (1) THE TENSION: a parent wants to leave the home to the children (to use the RNRB and/or secure the children's inheritance), but the surviving spouse needs to live in the home for the rest of their life. The two objectives appear to conflict; (2) LIFE INTEREST TRUST (the most common solution): the will creates a trust under which: (a) the surviving spouse has the right to live in the property ('life interest') for as long as they need it; (b) on the surviving spouse's death, the property passes to the children outright. The surviving spouse cannot sell the property without the children's consent (usually the trustees, who may be the same people), but the children cannot force a sale while the life interest is in place; (c) FOR RNRB PURPOSES: a life interest trust (technically an 'immediate post-death interest' trust under IHTA 1984) qualifies for the RNRB — the property is treated as passing to the children for RNRB purposes even though the spouse occupies it; (3) ABSOLUTE GIFT TO CHILDREN WITH INFORMAL ARRANGEMENT: some parents leave the house directly to children and rely on an informal understanding that the surviving spouse can continue to live there. This has serious risks: (a) The children have no legal obligation to allow the surviving spouse to remain; (b) The surviving spouse has no legal right to occupy (absent a trust); (c) If a child divorces, becomes bankrupt, or dies, the surviving parent's right to live in the home is at risk; (4) JOINT TENANCY FIRST, THEN CHILDREN: the most common practical approach — leave everything to the surviving spouse (joint tenancy passes by survivorship; any assets pass under the will to the spouse), and the surviving spouse then leaves everything to the children in their own will. This defers the RNRB to the second death but both NRBs and both RNRBs are available at that point; (5) SDLT ON CHILDREN INHERITING: if property passes to children who already own a home, the inherited property does not attract the higher rate SDLT surcharge (the 3% additional dwelling surcharge). Inherited property is treated as distinct from a 'purchase'. However, if the children subsequently acquire a new residential property, the inherited home counts as an existing residential property for the surcharge calculation.

The downsizing addition (also called the Downsizing Allowance) allows a person who has sold or otherwise disposed of a qualifying residential property to still claim the RNRB: (1) THE RULE (IHTA 1984 s.8FA-8FE): if a person owned a qualifying residential property after 8 July 2015 and subsequently: (a) sold it; (b) gave it away; (c) moved to a less valuable property; or (d) moved into a care home or sheltered housing, they may still claim the RNRB on their death — provided the assets they retained from the disposal are in their estate and pass to a direct descendant; (2) THE ADDITION: the Downsizing Addition is the lesser of: (a) the RNRB that would have been available if the original (larger) property had still been owned at death; and (b) the value of assets passing to direct descendants at death; (3) PRACTICAL EXAMPLE: parent owned a house worth £600,000; downsized to a flat worth £150,000 in 2022. At death, RNRB available on flat: £150,000. RNRB that would have been available on original house: £175,000. Downsizing addition: £175,000 - £150,000 = £25,000 additional RNRB. Total RNRB: £175,000; (4) WHERE PROPERTY WAS SOLD COMPLETELY: if the person moved into a care home, sold the house, and the cash proceeds are in the estate at death and pass to direct descendants, the full £175,000 RNRB may be available — even though no residential property is in the estate at all; (5) CLAIMING THE ADDITION: the executor must actively claim the Downsizing Addition by completing form IHT436. Evidence required: value of former property; date of disposal; what assets replaced it; evidence the proceeds passed to direct descendants; (6) COMMON OVERSIGHT: many executors miss the Downsizing Addition — it is not automatic and requires a specific form. For anyone who moved house after 8 July 2015, the executor should check whether the addition applies. The potential saving (RNRB × 40% = up to £70,000 per person) justifies the effort.