RNRB Taper for Estates Above £2 Million: How the Residence Nil Rate Band Is Reduced
The Residence Nil Rate Band reduces by £1 for every £2 that the net estate exceeds £2 million. An individual with a £175,000 RNRB loses it entirely when the estate reaches £2.35 million. Critically, the taper uses the gross net estate — business and agricultural property attracting BPR or APR still counts toward the £2m threshold.
RNRB Taper: Available Relief by Estate Value
Assumes maximum individual RNRB of £175,000 (2026/27). “Transferred RNRB” assumes full unused RNRB transferred from first death (£175,000 + £175,000 = £350,000 total).
| Net estate at death | RNRB available (individual) | RNRB available (surviving spouse, full transfer) |
|---|---|---|
| Up to £2,000,000 | £175,000 (full) | Up to £350,000 (full) |
| £2,100,000 | £125,000 | £300,000 |
| £2,200,000 | £75,000 | £250,000 |
| £2,300,000 | £25,000 | £200,000 |
| £2,350,000 | Nil | £175,000 |
| £2,500,000 | Nil | £100,000 |
| £2,700,000 | Nil | Nil |
| Above £2,700,000 | Nil | Nil |
Taper Calculation: Net Estate Before Reliefs
The RNRB taper under IHTA 1984 s8D uses the “net value of the estate” — total assets at death less total liabilities. This calculation is made before any of the following are applied:
- Business Property Relief (BPR) — including 100% BPR on unquoted business shares and 50% BPR on AIM shares
- Agricultural Property Relief (APR) — including 100% APR on owner-occupied farmland
- Spouse or civil partner exemption
- Charity exemption (IHTA 1984 s23)
A person with a £2.4m estate made up of: £1.5m main residence, £500,000 savings, and £400,000 AIM portfolio (qualifying for 50% BPR) has a net estate of £2.4m for taper purposes. The RNRB is therefore £175,000 less (£2.4m − £2m) / 2 = £25,000: the available RNRB is £175,000 − £200,000 = reduced below nil, so the available RNRB is £75,000.
Contrast with the actual IHT calculation: the 50% BPR on the £400,000 AIM portfolio reduces the chargeable transfer by £200,000, so IHT is calculated on a lower value — but the taper has already reduced the available RNRB before that calculation.
Pensions and the Taper from April 2027
From 6 April 2027, unspent DC pension funds will be included in the estate for IHT purposes. They will also be included in the net estate for RNRB taper purposes. For many individuals whose estate (excluding the pension) is comfortably below £2m, adding the pension may push the total above the taper threshold.
This interaction between the pension IHT changes and the RNRB taper means that estates that currently sit comfortably within the taper threshold may cross it from April 2027. Review both elements together.
Planning to Protect the RNRB
The most effective way to protect the RNRB from the taper is to reduce the net estate below (or closer to) £2 million. The main tools:
Lifetime gifts (PETs): assets given away and surviving 7 years are outside the estate entirely — including for taper purposes. Regular smaller gifts using the annual exemption (£3,000 per year, with carry-forward of one year), the normal expenditure out of income exemption, and occasional larger PETs are all useful. A gift into a discretionary trust is a chargeable lifetime transfer (CLT) — it is outside the estate if the donor survives 7 years, but note it may attract immediate IHT above the NRB.
Careful will drafting on first death:on the first death of a couple, consider whether leaving assets to a trust (rather than outright to the surviving spouse) can reduce the surviving spouse's estate and protect the RNRB taper on second death. A nil-rate band discretionary trust can hold assets outside the surviving spouse's estate while still providing for the survivor at trustee discretion.
Insurance in trust: a whole-of-life policy written in trust is outside the estate and does not affect the taper calculation. The payout covers the IHT bill without increasing the estate. Premiums paid from regular income may qualify for the normal expenditure out of income exemption — immediately IHT-free with no 7-year clock.
Frequently Asked Questions
How does the RNRB taper work for estates above £2 million?
Under IHTA 1984 s8D, the Residence Nil Rate Band (RNRB) is reduced — tapered — where the net value of the estate exceeds £2 million. The reduction is £1 for every £2 by which the estate exceeds the £2 million threshold. The taper operates as follows: (1) Calculate the net estate (total assets less liabilities — debts, mortgages, funeral expenses). (2) If the net estate is £2 million or less: full RNRB applies. (3) If the net estate exceeds £2 million: RNRB is reduced by £1 for each £2 of excess. For a person with the maximum RNRB of £175,000: the RNRB is fully withdrawn when the estate reaches £2,350,000 (£175,000 × 2 = £350,000 excess; £2,000,000 + £350,000 = £2,350,000). For a surviving spouse using a full transferred RNRB from a deceased spouse (£350,000 total where neither has been used): the RNRB is fully withdrawn when the estate reaches £2,700,000 (£350,000 × 2 = £700,000 excess; £2,000,000 + £700,000 = £2,700,000). At typical property prices in London and the South East, an estate with a home plus pension plus savings can easily exceed £2 million, making the taper a real planning concern for many families.
Does the taper use the estate value before or after BPR/APR reliefs?
The taper threshold is calculated on the net estate value BEFORE any BPR, APR, spousal exemption, or charitable exemption reliefs are applied. Under IHTA 1984 s8D, the relevant figure is the 'net value of the estate' — the gross estate less liabilities. Reliefs and exemptions reduce the chargeable transfer (the amount on which IHT is calculated) but they do not reduce the estate for the purposes of the RNRB taper calculation. The practical effect is critical: a person with a £2.3m estate that includes a £400,000 AIM share portfolio (attracting 50% BPR) still has a net estate of £2.3m for taper purposes — the BPR does not bring the estate below £2m. Similarly, a farming estate where the land and buildings attract 100% APR still counts the full value of those assets when measuring against the £2m taper threshold. This is one of the most misunderstood aspects of the RNRB: the relief available on business or agricultural assets does not help protect the RNRB from the taper.
What is the RNRB and which estates qualify for it?
The Residence Nil Rate Band (RNRB) is an additional nil-rate band of up to £175,000 per person (2026/27 and frozen until at least April 2028) available when a main residence (or a former main residence via the downsizing provisions) is passed to 'direct descendants' — children, stepchildren, adopted children, and their lineal descendants. The RNRB is on top of the standard Nil Rate Band of £325,000. A single person can potentially have £325,000 + £175,000 = £500,000 before IHT is payable. A surviving spouse can use their own NRB + RNRB and the unused NRB + RNRB from the first death, for a potential total of £1,000,000 before IHT. For the RNRB to be available: (1) The estate must include a qualifying residential interest (or the downsizing provisions must apply). (2) The property must be 'closely inherited' — passed to direct descendants. (3) The estate must not exceed the taper threshold. The RNRB does not apply where the property is left to non-descendants (for example, to siblings, charities, or a trust for non-descendants).
Can lifetime gifts bring the estate below £2 million and protect the RNRB?
Yes — reducing the estate below £2 million (or closer to it) can restore or increase the available RNRB. Lifetime gifts that are potentially exempt transfers (PETs) are not included in the estate for IHT if the donor survives 7 years. If the donor does not survive 7 years, the failed PET is brought back into the estate for IHT calculation — but critically, it is NOT included in the estate for the RNRB taper calculation. Under the legislation, the taper threshold is measured against the net estate at death (assets owned at death less liabilities), not including any failed PETs or other additions to the cumulative total. This means a gift that subsequently fails (donor dies within 7 years) does not re-expose the RNRB to tapering. The estate for taper purposes is what the deceased actually owned at death, less liabilities, not a cumulated 7-year estate. Practical strategy: making lifetime gifts to children (or other beneficiaries) while the donor is in good health and can reasonably expect to survive 7 years can reduce the estate below £2m and restore RNRB availability — provided those gifts do not themselves constitute a gift with reservation (GROB) that remains in the estate under FA 1986 s102.
Does leaving assets to charity reduce the estate for RNRB taper purposes?
No — this is a common misconception. The charitable legacy exemption reduces the chargeable transfer (the value on which IHT is calculated) but it does not reduce the net estate for the RNRB taper. A person with a £2.4m estate who leaves £100,000 to charity still has a net estate of £2.4m for taper purposes — the charitable gift does not reduce the estate to £2.3m for the taper calculation. The RNRB taper uses the gross net estate (assets less liabilities, ignoring all exemptions and reliefs). However, the charitable legacy does still reduce the actual IHT bill: (1) The £100,000 charitable gift is exempt from IHT under IHTA 1984 s23. (2) If the charitable legacy represents at least 10% of the 'baseline amount' (the chargeable estate before the charitable gift), the IHT rate falls from 40% to 36% under FA 2012. (3) If the charitable legacy is large enough to reduce the chargeable estate below the available NRB + RNRB, the overall IHT bill may be reduced. So charitable giving is still beneficial for large estates — it just cannot rescue the RNRB from the taper when the gross net estate exceeds £2m.
What are the main planning strategies for preserving the RNRB when the estate is above £2 million?
The main strategies to preserve the RNRB in a large estate are: (1) LIFETIME GIFTS (PETs): give assets away during lifetime; surviving 7 years removes them from the estate (not from the taper threshold; gifts do not bring the estate back above £2m if they fail — but gifts that succeed are genuinely outside the estate). Typical assets to give: investments, cash savings, shares in companies (possibly with holdover relief for CGT). (2) SPOUSAL PLANNING ON FIRST DEATH: if the first spouse to die has a large estate, consider leaving assets to children or a discretionary trust rather than the surviving spouse, if this reduces the surviving spouse's estate below the taper threshold. The risk: the surviving spouse may need the assets for income. A flexible life interest or discretionary trust allows the surviving spouse to benefit but reduces their taxable estate if the trust is structured as a relevant property trust rather than an IPDI. (3) SPEND DOWN ASSETS: for older individuals with large estates, spending from savings and investments while retaining the property (which qualifies for RNRB) reduces the estate over time. (4) WHOLE-OF-LIFE INSURANCE IN TRUST: a policy in trust is outside the estate and provides a tax-free lump sum for beneficiaries to pay the IHT — the estate value is unchanged but the IHT bill is funded. (5) PENSION DRAWDOWN POST-2027: after April 2027, unspent pension pots will be included in the IHT estate — if the pension itself causes the estate to exceed £2m, the taper will apply. Reviewing drawdown strategy before 2027 is important for those whose estate without the pension is close to the £2m threshold.
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