There is an old adage that says, if it seems too good to be true, it probably is.  This is often a truism when it comes to tax blazing headlines such as “IHT (Inheritance Tax) threshold hits £1m”, following the Summer Budget of 2015. The euphoria arose because the UK IHT threshold has been fixed at £325,000 since 6th April 2009.

However from 6th April this year we began our march towards the realisation of an IHT threshold of £1m but the devil is in the detail. This £1m IHT threshold is being achieved through the introduction of the new cumbersome RNRB (Residential Nil Rate Band) which is then added to the existing individual IHT Nil Rate Band (NRB) of £325,000.

The annual RNRB and NRB that takes us to the £1m IHT threshold is set out in Table 1.


The £1m threshold is achieved from the sum of a married couple or civil partners’ individual IHT NRB and RNRB, (£500,000 x 2) from 2020-21.

The £1m threshold will be effective from 2020-21, when a surviving spouse or civil partner dies on or after 6th April 2020; and their estate includes a home they had owned, or a share of one, and the home has been left to their “direct descendants”.

Professional advice should be sort because the IHT threshold of £1m is not an automatic right on the death of a surviving spouse or civil partner. For example, if there was any consumption (full or partial) of the £325,000 NRB following the death of the first spouse or civil partner, the estate on the death of the surviving spouse or partner will not enjoy a £1m IHT threshold.

In addition the value of the estate of the deceased should not exceed £2 million. The RNRB will also be available in cases where a deceased had downsized to a less valuable home or sold or given away their home after 7 July 2015. The direct descendants for the benefit of the RNRB is set out in Table 2.

The explicit statement of married couples or civil partners is a further IHT planning warning for cohabiting partners. In the same way that the nil rate band can be transferred between married couples any unused RNRB will also be transferable on the death of any surviving spouse or civil partner who dies after 5th April 2017, irrespective of the death of the first of the couple.

The RNRB is only applicable to one home within the deceased’s estate and must have been lived in at some stage by the deceased before their death. Any property owned by a deceased which they never lived in, such as a buy-to-let property will not qualify for the RNRB.

The home of a deceased can be inherited by their direct descendant via the deceased’s Will, rules of intestacy or some other legal means, to qualify for the RNRB.

However, if the Will has a condition that the deceased’s grandchildren have to reach a certain age before they can inherit the home which means the property is held in a trust subject to a contingency, the RNRB wouldn’t apply. This is because the grandchildren don’t inherit the home on the death of their grandparent.

The RNRB will be reduced by £1 for every £2 that the value of the estate is more than the £2 million taper threshold even if a home is left to direct descendants

Whilst policy makers are championing the arrival of the £1m IHT threshold, most taxpayers are less jubilant. Further professional advice should be sort to address the thorny issues of properties in trust and property downsizing.