Nil-Rate Bands: Stretching £325k to £1 million (Legally)

Step-by-step: stacking the allowances

Used together, the basic £325k NRB and £175k RNRB can let a couple pass on £1m free of IHT. Here is the workflow advisers use:

1. Audit existing wills – do they leave the main residence outright to direct descendants?
2. Check estate value vs. the £2m taper cliff.
3. Transfer any unused allowance from the first death.
4. For large estates: downsize now and bank the relief.

Downsizing relief worked example

Mr & Mrs Lee sold their £800k home in 2023 and moved into a £350k apartment. On death their executors can still claim the full £175k RNRB against other assets if the documentation trail is clear.

Common pitfalls

• Leaving the house to a discretionary trust – generally nukes the RNRB.
• Zero-rate mortgages increasing the gross estate above £2m.
• Gifting the home but continuing to live there rent-free (GWR).