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Advanced Taxation (UK) · Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Death Estate and Residence Nil Rate Band in ATX-UK

Updated 11 October 2026 · Fact-checked

Inheritance tax on death is charged at 40% on the estate above the available nil rate bands. Those bands are the £325,000 nil rate band, any unused spouse's share, and the residence nil rate band of £175,000, which tapers away on large estates. If enough goes to charity, the rate falls to 36%.

Understand Death Estate and Residence Nil Rate Band

On death, you are treated as making a transfer of value equal to your whole estate. The estate is everything you own, less debts and funeral costs. It also includes assets you gave away but still benefit from. The tax is charged at the death rate of 40% on the part above the available nil rate bands.

The basic nil rate band is £325,000. If a spouse or civil partner died earlier and did not use all of theirs, the unused percentage is added to the survivor's band. Only the percentage unused matters, so you apply it to the nil rate band that applies on the second death. The extra is capped at 100% of one band.

The residence nil rate band (RNRB) is an extra £175,000. It is available when a home you lived in is left to direct descendants, such as children and grandchildren. The relief is the lower of the RNRB available and the value of the qualifying home passing to them. Unused RNRB from a deceased spouse can also be transferred.

The RNRB is tapered for large estates. It is reduced by £1 for every £2 by which the net estate exceeds £2,000,000. For this test, use the estate after liabilities but before reliefs and exemptions. A very large estate can lose the RNRB completely.

If at least 10% of the baseline amount is left to charity, the rate on the rest drops from 40% to 36%. The baseline amount is the estate after liabilities, reliefs and exemptions but before the charity exemption, less the available nil rate band. The RNRB is not deducted in the baseline.

Key rules to remember

Death rate and nil rate band
Tax = 40% × (chargeable estate − available nil rate band − available RNRB)
Nil rate band £325,000, RNRB £175,000, death rate 40%, all from the ACCA tax tables. Lifetime gifts in the previous seven years can use up the nil rate band first.
Transferable nil rate band
Extra band = unused % of deceased spouse's band × nil rate band on the survivor's death
Total extra is capped at 100% of one nil rate band.
RNRB available
RNRB = lower of (RNRB available after taper) and (value of qualifying home passing to direct descendants)
Unused RNRB of a deceased spouse can be added before the lower-of test.
RNRB taper
Reduction = (net estate − £2,000,000) ÷ 2
Net estate is before reliefs and exemptions. The reduction applies to the total RNRB, including any transferred amount.
Charity rate test
Charity gift ≥ 10% × (estate before charity exemption − available nil rate band) → 36% rate
Check the test first. If met, the whole taxable estate is taxed at 36%.

How to solve Death Estate and Residence Nil Rate Band questions

Work through the estate in a fixed order. Show each figure so you collect method marks even if one number is wrong.

  1. 1List the assets and deduct debts and funeral costs to get the net estate. Add any assets caught by gifts with reservation.
  2. 2Deduct exempt amounts, such as the spouse and charity exemptions, and any reliefs, such as business property relief. Keep the pre-charity figure for the 10% test.
  3. 3Work out the nil rate band available. Start with £325,000, add any unused spouse percentage, and reduce for chargeable lifetime transfers in the previous seven years.
  4. 4Work out the RNRB. Check the home and a direct descendant beneficiary. Add any transferable RNRB, taper if the net estate exceeds £2,000,000, then apply the lower-of test.
  5. 5If there is a charity gift, compute the baseline amount and test 10%. Choose 40% or 36%.
  6. 6Compute the tax on the chargeable estate after both bands, at the chosen rate.
  7. 7Say who bears the tax and when it is due. Comment on any planning point the scenario raises.

Quickest way: Band-first shortcut

When to use it: Use this when the question gives you a clean estate and asks only for the death tax.

  1. Write the total bands first: £325,000 plus transferable percentage, then RNRB after taper and the lower-of test.
  2. Take the net estate less exemptions and reliefs, and subtract the total bands.
  3. If a charity gift is present, test 10% of (estate before charity − nil rate band) before choosing the rate.
  4. Multiply the result by 40% or 36%.

Common mistakes in Death Estate and Residence Nil Rate Band

  • Deducting the RNRB when computing the charity baseline amount.

    Students treat all bands as the same thing.

    Fix: Only the nil rate band, including any transferred amount, comes off the baseline. Do not deduct the RNRB.

  • Using the estate after exemptions to test the £2,000,000 taper.

    They use the chargeable estate figure they already have.

    Fix: Use the net estate after liabilities but before reliefs and exemptions.

  • Applying the transferred nil rate band as a fixed pound amount from the first death.

    They take the old figure literally.

    Fix: Take the unused percentage and apply it to the nil rate band on the survivor's death.

  • Giving the full RNRB when the home is worth less than the RNRB, or is left to a non-descendant.

    They forget the lower-of test and the beneficiary condition.

    Fix: Check who receives the home and cap the RNRB at the home's value passing to direct descendants.

  • Applying 36% only to the charity-adjusted amount or after wrongly testing the 10%.

    They mix the baseline amount with the taxable estate.

    Fix: Compute the baseline separately. If the test is met, tax the whole remaining taxable estate at 36%.

Worked examples

Example 1

Alan, a widower, dies leaving a home worth £500,000 to his daughter and other assets of £400,000 to his son. There are no debts and no lifetime gifts. His late wife used 40% of her nil rate band and none of her RNRB, and her estate had no qualifying home. Compute the IHT on Alan's death.

Show the solution
  1. Net estate = £500,000 + £400,000 = £900,000. This is below £2,000,000, so there is no taper.
  2. Nil rate band: wife's unused share is 60% × £325,000 = £195,000. Total = £325,000 + £195,000 = £520,000.
  3. RNRB: Alan's £175,000 plus the wife's unused £175,000 = £350,000. The home passing to direct descendants is £500,000. The lower is £350,000.
  4. Chargeable amount = £900,000 − £520,000 − £350,000 = £30,000.
  5. Tax = £30,000 × 40% = £12,000.

Answer: IHT on death is £12,000.

Example 2

Beth, single, dies with a net estate of £2,300,000, including a home worth £800,000 left to her son. She leaves £250,000 to charity. She made no lifetime gifts. Compute the IHT payable.

Show the solution
  1. Taper: excess over £2,000,000 = £300,000. Reduction = £300,000 ÷ 2 = £150,000. RNRB = £175,000 − £150,000 = £25,000. The home is £800,000, so the lower-of test gives £25,000.
  2. Nil rate band = £325,000.
  3. Baseline amount = £2,300,000 − £325,000 = £1,975,000. 10% = £197,500.
  4. Charity gift £250,000 is more than £197,500, so the 36% rate applies.
  5. Estate after charity exemption = £2,300,000 − £250,000 = £2,050,000.
  6. Chargeable amount = £2,050,000 − £325,000 − £25,000 = £1,700,000.
  7. Tax = £1,700,000 × 36% = £612,000.

Answer: IHT payable is £612,000 at the 36% rate.

Exam tips

  • Write the band figures at the top of your answer. Markers reward a clear build-up of the total bands.
  • Always test the 10% charity condition when a charity legacy appears. The examiner often sets the gift just above or just below the threshold.
  • State the taper figures in full: net estate, excess, half of the excess, remaining RNRB.
  • Take the rates and band amounts from the tax tables. Do not rely on memory for them.
  • Add a brief comment on planning, such as how a variation or a change to the will could reach the 36% rate. This helps the professional skills marks.

Practice questions from Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Death Estate and Residence Nil Rate Band in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Death Estate and Residence Nil Rate Band: frequently asked questions

How does the residence nil rate band taper work in ATX-UK?

The RNRB is cut by £1 for every £2 that the net estate exceeds £2,000,000. Use the estate before reliefs and exemptions. It is lost entirely when the reduction equals the RNRB available.

How do I calculate the transferable nil rate band?

Find the percentage of the first spouse's nil rate band that was unused. Apply that percentage to the nil rate band at the second death. The total extra is capped at 100% of one band.

When does the 36% inheritance tax rate apply?

It applies when at least 10% of the baseline amount is left to charity. The baseline is the estate before the charity exemption less the available nil rate band. The 36% rate then applies to the whole chargeable estate.

Does the RNRB apply if the home is left to a spouse?

The spouse exemption removes that part of the estate from the charge. The RNRB is for a home passing to direct descendants. Any unused RNRB can be transferred to the surviving spouse for their death.