Malcolm Finney outlines the downsizing relief rules in the inheritance tax residence nil-rate band.
The inheritance tax (IHT) legislation provides for a ‘residence nil-rate band’ (commonly referred to as the RNRB), which is effectively an allowance available for offset against an individual’s estate on death. Currently, it is worth a maximum of £175,000.
The RNRB broadly applies where on the death of the owner of a home, it is ‘closely inherited’. ‘Closely inherited’ refers to inheritance by lineal descendants (e.g., children). Perhaps unusually, a stepchild or an adopted child qualifies for RNRB purposes as a ‘child’.
Typically, the home must pass under the deceased’s will (or by way of intestacy).
