IHT Home Allowance(s) Date: 2024-04-18
IHT Home Allowance(s)
In the UK, the inheritance tax (IHT) allowance regarding the matrimonial home is primarily covered under two main allowances:
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- Nil-Rate Band (NRB) — Standard Allowance • Every individual has a £325,000 inheritance tax-free threshold. • This is called the nil-rate band. • Assets up to this amount can be passed on tax-free upon death.
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- Residence Nil-Rate Band (RNRB) — Additional Allowance for the Home
If you leave your main residence to a direct descendant (e.g., children, stepchildren, grandchildren), an additional allowance applies: • Up to £175,000 per person (on top of the standard £325,000). • Applies only to one home and only if it was a residence at some point. • Must go to a direct descendant to qualify. • If the estate exceeds £2 million, the RNRB tapers off by £1 for every £2 over the threshold.
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- Combined Threshold for Married Couples or Civil Partners • Spouses and civil partners can inherit from each other tax-free (no IHT between them). • Unused NRB and RNRB from the first partner’s estate can be transferred to the surviving spouse. • This means the combined total allowance could be: • £325,000 + £175,000 = £500,000 per person • Up to £1 million per couple if both allowances are fully available and used
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Example
A couple leaves their family home (valued at £800,000) to their children: • First death: no IHT due (assets pass to spouse). • Second death: if full allowances are available, £1 million threshold applies, and the entire value may pass tax-free.
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Let me know if you want details about trusts, taper relief, or downsising protections under the RNRB.