From 6 April 2017, there is an important inheritance tax changes (IHT) that families need to be aware of so that they can plan their wealth effectively for the future.

This change is often referred to as the ‘family home allowance’ but is more correctly referred to as the Residence Nil-rate Band (RNRB).


Everyone has a personal Nil-Rate Band (NRB) currently set at £325,000, unless they have used some of it to make gifts or have inherited NRB from a spouse or civil partner who has died.

Married couples and civil partners (but not unmarried couples) are able to pass their assets to each other tax-free, and the surviving partner is allowed to use both tax-free allowances (unless of course some was used up on the first death), effectively doubling their combined NRB to £650,000.

Where IHT is payable, on amounts above the deceased’s total (NRB) entitlement, it is normally at a rate of 40%.


The RNRB is an additional allowance brought in through recent inheritance tax changes. It can be used where the surviving spouse or civil partner dies on or after 6 April 2017 and passes their interest in a residential property to one or more direct descendants, meaning children, stepchildren, adopted children, foster children and lineal descendants.

It also includes the spouses or civil partners of lineal descendants, providing they didn’t remarry before the death of the individual bequeathing the property.

The maximum RNRB that a couple can have is the lower of the value of the house or two times the RNRB. The RNRB is £100,000 from April 2017, rising to £175,000 by 2020.

For a property to qualify, several criteria must be met. In the case of a couple, only the second spouse to die needs to have lived in the property.

Buy-to-let properties are not eligible if the owner did not live there. A former main residence that is rented out would qualify.

If there are several properties involved, then the executor of the estate can choose which property to nominate.

In a case where a deceased downsized, this happened on or after 8 July 2015, then RNRB on the difference in value between the old and the new property can be claimed.

Where an estate has a net value of £2m or more, the RNRB is tapered away with £1 lost for every £2 net estate value over £2m.

Families that have assets of over £2m may benefit from making use of the NRB and RNRB on the first death in order to reduce the estate of the surviving spouse.


Inheritance tax changes including the introduction of the RNRB has given rise to headlines saying that parents or grandparents could pass on a home worth up to £1m free of IHT; however, in practice, the application of the RNRB can be complex and requires expert estate planning advice.

Not all Inheritance Tax Planning solutions are authorised and regulated by the Financial Conduct Authority.

For more information on how to create a diversified investment portfolio please do get in contact with us. We offer a free initial portfolio review to get you started. Clifford Osborne are Independent Financial advisers based in Eastbourne, with clients coming from Lewes, Brighton, Tunbridge Wells, Heathfield, Uckfield, Bexhill, Hastings and further afield in East Sussex.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.