George Hay Chartered Accountants were one of the first accountancy firms in the country to obtain a licence to carry out non-contentious probate work. In our monthly column, we give you an insight into the process and provide an update on what is happening in the world of probate and estates.

A recent addition to the Inheritance Tax (IHT) regime is the Residential Nil Rate Band (RNRB), which gives additional relief to certain taxpayers.

To obtain the relief there must be, included in the estate, a property which at some time in the past qualified as the deceased’s private residence.

The beneficiary of the property has to be a lineal descendent. This would include children and grandchildren. Children encompasses step-children, adopted children and even children that were once fostered.

There is no need for the children to benefit explicitly i.e., “I leave my house to my children”. Simply writing “I leave my estate to be divided equally between my children” in your Will, will qualify.

The relief is worth £175,000. If one spouse in a married couple does not use the relief on their death, then the surviving spouse can have double relief. This is often the case where the surviving spouse inherits the property on the first death with the property passing to the children on the second death.

With IHT at a rate of 40%, a saving of £350,000 (2 x £175,000) @ 40% = £140,000, so it is worth having.

There are three further points to consider:-

  1. a) To qualify, you need to have children – no children, no additional relief. Many feel this to be unfair.
  1. b) There is a clawback of £1 relief for every £2 of assets above £2m. So, if somebody has an estate of say £2,200,000 that is £200,000 over the limit and so the RNRB is reduced by one-half of the excess, in this case £100,000.

Therefore, on one allowance of £175,000, this will be lost after £2.35m and if a double band, then it will be fully lost after £2.7m.

The £2m limit has to be looked at on both deaths if there is a married couple. For example, if on the first death an estate is worth £2.6m, even if the family house is left to the surviving spouse, no RNRB is available for transfer, so the survivor will just have £175,000.

The totally bizarre condition is that the £2m limit is in respect of assets held on the date of death. So, if somebody with an estate worth £3m gives £1m away on their death bed, the RNRB can be claimed.

This does not affect the value of the estate subject to IHT which would still include the £1m gifted as it was a gift within 7 years.

We did some planning recently where a 96 year old did something like this, with no expectation of living 7 years so no IHT saving, but to get their RNRB.

In another twist, the £2m is before reliefs, for example, farmland on which no IHT is payable but the value before relief is deducted in the £2m calculation.

  1. c) The final point we need to look at is where somebody has downsized or sold their house.

For example, if somebody has benefitted from a double rate band living in a house worth £450,000, which they are leaving to their children, then £350,000 would qualify for RNRB.

Should they then downsize to a smaller flat worth £250,000, then potentially RNRB would only be £250,000 with the cash now in the bank of £200,000 being potentially fully chargeable to IHT if the estate is large enough.

Downsizing relief recognises this and enables the taxpayer to “bank” their relief. In the above case, £100,000 of free cash would see RNRB being increased back to £350,000.

Although called downsizing relief, it also applies if the person gives up owning a house completely e.g., because they have moved into say rented, sheltered or other family accommodation.

In respect of IHT, preserving reliefs and ensuring that you obtain what you are entitled to is important, and this can be made easier with thorough and proactive tax planning.

To talk to one of our professionals in confidence about our probate and estate services, call 01480 426500, or to find out more about how we can support you estate and Inheritance Tax planning, visit

Authored by Director of GH Probate Ltd., Barry Jefferd.

Our Probate service is provided through GH Probate Limited. GH Probate is the trading style of GH Probate Limited. Registered in England and Wales number 9630102. Registered Office: St George’s House, George Street, Huntingdon, Cambridgeshire PE29 3GH.

Authorised to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England & Wales.

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