The residence nil-rate band
The residence nil-rate band is an extra allowance of up to £175,000 that can apply when a home, or the value of a former home, passes to children, grandchildren or other direct descendants (gov.uk, as at June 2026, subject to change). Added to the £325,000 nil-rate band, it can lift a single person's tax-free total to £500,000 where the conditions are met. It does not apply to every estate.
- A qualifying home. The band generally applies to a residence that has been the deceased's home at some point.
- Direct descendants. It applies where the home passes to children, including adopted, foster and stepchildren, or grandchildren.
- The taper. The residence band reduces by £1 for every £2 that an estate is worth above £2,000,000, so larger estates may receive a reduced band or none at all.
Where a person has downsized or sold their home before death, a downsizing addition may still allow some of the band to be claimed, depending on circumstances. Because the conditions are detailed, it can be worth discussing eligibility with a qualified professional.
How the bands work for married couples and civil partners
Transfers between spouses and civil partners are generally exempt from inheritance tax, and any unused nil-rate band and residence nil-rate band can pass to the survivor (gov.uk, as at June 2026, subject to change). This is how a couple can reach a combined tax-free figure of up to £1,000,000. When the first partner dies leaving everything to the other, little or none of their allowances is used, so the survivor's estate can claim up to two of each band.
Unmarried partners do not benefit from the transferable bands or the spouse exemption, which can leave a larger inheritance tax exposure on the second death.
A worked example (illustration only). A married couple own a home worth £450,000 and other assets of £350,000, an estate of £800,000. On the first death, everything passes to the survivor and is generally exempt. On the second death, the estate may claim two nil-rate bands (£325,000 each, so £650,000) and, because the home passes to their children, two residence nil-rate bands (£175,000 each, so £350,000), giving combined thresholds of up to £1,000,000. In this illustration the £800,000 estate falls within those thresholds, so the estimated inheritance tax could be nil. Change any figure, or leave the home to someone other than a descendant, and the result changes. This is general information, not a calculation for a specific estate.
Why the freeze matters
The nil-rate band, the residence nil-rate band and the £2,000,000 taper threshold are frozen until the end of the 2030-31 tax year (5 April 2031) (gov.uk, as at June 2026, subject to change). While the thresholds stay fixed, house prices and savings often continue to rise, so more estates may be drawn above the tax-free level over time. This is one reason many people choose to review their position earlier rather than later.
Alongside the thresholds, some people consider lifetime gifting to reduce a future bill. Gifts can carry their own rules, including the seven-year rule and separate exemptions such as the annual exemption. Our guide to gifting and the 7-year rule for inheritance tax covers those in detail, and our overview of how to reduce inheritance tax legally sets out the wider options.
