Budget 2018: minor changes to residence nil rate band

The government is making minor amendments to the residence nil rate band (RNRB) to clarify downsizing rules and provide certainty over when a person is treated as ‘inheriting’ property, with these changes being effective immediately

This measure introduces minor technical amendments to the RNRB relating to downsizing provisions and the definition of ‘inherited’ for RNRB purposes.

The government has not consulted on these changes and they are effective from 29 October 2018.

The RNRB was announced at Summer Budget 2015 and was introduced on 6 April 2017. The RNRB is an additional inheritance tax nil rate band, conditional on a residence being passed on death to a direct descendant.

The RNRB is currently £125,000, and will rise to £150,000 in 2019-20, and £175,000 in 2020-21. Any unused RNRB can be transferred to a surviving spouse or civil partner.

Legislation will be introduced in Finance Bill 2018-19 to:

  • amend Section 8FE IHTA to ensure that the value of any part of a residence that is inherited by an exempt beneficiary is taken into account in determining a person’s lost relievable amount.
  • amend Section 8J IHTA to ensure that where a residence forms part of a person’s estate immediately before their death as a gift with reservation of benefit, in accordance with Section 102(3) FA 1986, it will only be treated as being inherited by a direct descendant if the property became immediately comprised in the direct descendant’s estate as a result of the original gift.

This measure is not expected to have any impact on the Exchequer.

The government will also introduce legislation in Finance Bill 2019-20 to reflect HMRC’s established legal position in relation to the inheritance tax (IHT) treatment of additions to existing trusts.

The legislation will confirm that additions of assets by UK-domiciled (or deemed domiciled) individuals to trusts made when they were non-domiciled are not excluded property.

The legislation will apply to IHT charges arising on or after the date on which Finance Bill 2019-20 receives Royal Assent, whether or not the additions were made prior to this date.

As announced at Autumn Budget 2017 the government will legislate in Finance Bill 2018-19 to increase the assessment time limit for offshore tax non-compliance to 12 years for Income Tax, Capital Gains Tax and Inheritance Tax. Where there is deliberate behaviour the time limit remains at 20 years.

Tax rates for inheritance tax are:

 2018-19 2019-20 2020-21

Rate (for estates)


Reduced rate (for estates leaving 10% or more to charity)


Rate (for chargeable lifetime transfers)


Nil rate band limit


Residence nil rate band


Report by Amy Austin

Amy Austin |Reporter, Accountancy Daily [2016-2019]

Amy Austin was reporter, Accountancy Daily and Accountancy magazine, published by ...

View profile and articles

Average: 5 (1 vote)

Rate this article

Related Articles