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Transferring Unused Residence Nil-Rate Band
When a spouse or civil partner dies, any residence nil-rate band they didn't use can be transferred to the surviving partner's estate, potentially doubling the tax-free allowance available when the survivor later passes away. This transfer is available even if the first partner died before the...
When a spouse or civil partner dies, any residence nil-rate band they didn't use can be transferred to the surviving partner's estate, potentially doubling the tax-free allowance available when the survivor later passes away. This transfer is available even if the first partner died before the residence nil-rate band was introduced in April 2017.
What is the residence nil-rate band?
The residence nil-rate band (RNRB) is an additional Inheritance Tax threshold available when you leave your home to your children or other direct descendants. It sits alongside the basic nil-rate band and can significantly reduce the Inheritance Tax bill on your estate.
For the transfer to work, the surviving spouse or civil partner must leave a home to their direct descendants and include that home in their estate.
Which homes qualify for the transfer?
An important point: the home the surviving partner leaves to their children does not need to be the same property they shared with their late partner.
The home can be any property, provided:
- The surviving spouse or civil partner lived in it at some point before their death
- The home is included in their estate when they die
The surviving partner doesn't need to have previously owned the home jointly with their late partner, nor does it need to be a property they inherited from them.
When couples are not married
Only married couples and registered civil partners can transfer unused residence nil-rate band between each other. Unmarried couples, even long-term partners, cannot transfer this allowance to each other, though each can still use their individual residence nil-rate band if they leave a home to their direct descendants.
Divorced couples also cannot transfer unused residence nil-rate band between each other.
Transferring from someone who died before April 2017
The residence nil-rate band was introduced on 6 April 2017. If your spouse or civil partner died before this date, their estate would not have used any residence nil-rate band because it didn't exist yet.
This means 100% of the allowance is available to transfer to the surviving partner's estate, unless the first partner's estate was worth more than £2 million (in which case the residence nil-rate band may be tapered away).
How the transfer amount is calculated
The key principle is that you transfer the percentage of unused residence nil-rate band, not a fixed amount. This ensures the surviving partner's estate benefits from any increases in the threshold over time.
The calculation works in two steps:
Step 1: Work out what percentage of the residence nil-rate band went unused when the first partner died. Divide the unused amount by the total available at that time, then multiply by 100 to get the percentage.
For anyone who died before 6 April 2017, both the unused amount and the total available are treated as £100,000, giving an unused percentage of 100%.
Step 2: Multiply this unused percentage by the maximum residence nil-rate band available when the surviving partner dies. This gives you the transferable amount.
Example calculation
A man died in 2015 and left his entire estate of £600,000 to his wife. Because this was before the residence nil-rate band existed, 100% is available to transfer.
His wife dies on 30 July 2019, leaving her entire estate including a home worth £400,000 to their daughter.
In the 2019/20 tax year, the maximum residence nil-rate band was £150,000.
The executor claims to transfer the unused residence nil-rate band from the husband's estate.
The total residence nil-rate band available for the wife's estate is therefore £300,000, calculated as:
- Her own residence nil-rate band: £150,000
- Transferred from husband: 100% × £150,000 = £150,000
- Total: £300,000
The downsizing rules
If the surviving spouse or civil partner sold or gave away their home on or after 8 July 2015, the residence nil-rate band may still be available under the downsizing rules. This applies when they leave other assets (instead of a home) to their direct descendants when they die.
Transfer limits and multiple marriages
The percentage of transferred residence nil-rate band cannot exceed 100%. If someone has been widowed more than once and claims unused residence nil-rate band from multiple late spouses or civil partners, the total transferred cannot be more than 100% of the maximum available amount.
Independence from the basic nil-rate band
The residence nil-rate band operates separately from the basic Inheritance Tax threshold (currently £325,000). The percentages transferred can be different for each.
This means even if the first partner used all of their basic nil-rate band, you can still transfer 100% of their unused residence nil-rate band to the surviving partner's estate.
Making the claim
The personal representative (executor or administrator) of the surviving partner's estate must claim the transfer when completing the Inheritance Tax return. They'll need to provide details of the amount being claimed and supporting information about the late spouse or civil partner's estate.
Sources
This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.
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