Residence Nil Rate Band Taper: How a £2.3m Estate Loses £150,000 of RNRB
Once an estate is worth more than £2 million, the £175,000 residence nil rate band (RNRB) starts to taper away — losing £1 of allowance for every £2 of value above the threshold. A £2.3m estate sits £300,000 over the line, so its RNRB is cut by £150,000, leaving just £25,000. Get the estate back under £2m and the full £175,000 is restored — which is why the taper, not the headline 40% rate, is where the real planning happens.
What the RNRB taper actually is
The residence nil rate band is an extra slice of inheritance-tax-free allowance — currently £175,000 per person — that applies on top of the standard £325,000 nil rate band (NRB), but only when a residence (or a share of one) is passed to direct descendants: children, grandchildren, step-children and the like. Stack the two together and a single person can pass on £500,000 tax-free; a married couple or civil partners can reach £1 million.
But there is a catch that surprises a lot of families who assume "my house qualifies, so I get the full £175,000." For estates worth more than £2 million, the RNRB is tapered away. HMRC's own guidance puts it plainly:
"The residence nil rate band will reduce by £1 for every £2 that the estate is worth more than the £2 million taper threshold." — GOV.UK, Work out and apply the residence nil rate band
Three things make the taper sting more than people expect:
- It uses the value of the whole estate — not just the house, and not the amount left to descendants. Pensions, ISAs, business interests, second properties and even some gifts feed into the figure used for the £2m test.
- The reduction is £1 for every £2 over £2m — a 50p-in-the-pound clawback that builds fast.
- It happens even if you do leave a qualifying home to your children. Meeting every other condition does not protect you once you cross £2m.
The numbers that matter (2026/27, verified)
All of the figures below are frozen under the Finance Bill 2025-26 legislation, which holds the NRB, RNRB and the taper threshold at their current levels through to the end of the 2030/31 tax year. They are not rising with inflation, so more estates drift into taper territory every year.
| Item | Amount | Frozen until |
|---|---|---|
| Standard nil rate band (NRB) | £325,000 | 5 April 2031 |
| Residence nil rate band (RNRB) | £175,000 | 5 April 2031 |
| Taper threshold | £2,000,000 | 5 April 2031 |
| Taper rate | £1 lost per £2 over threshold | — |
| RNRB fully tapered to nil (single person) | £2,350,000 | — |
| RNRB fully tapered to nil (with transferred band) | £2,700,000 | — |
Source: GOV.UK Inheritance Tax thresholds and interest rates and Inheritance Tax nil-rate band and residence nil-rate band thresholds from 6 April 2026.
Worked example: the £2.3m estate that loses £150,000 of RNRB
Margaret, a widow, dies in the 2026/27 tax year. She never used a deceased spouse's RNRB (we'll cover that case separately below), so she has a single person's £175,000 RNRB to start with. Her estate, valued for probate, totals £2,300,000: a £900,000 home left to her two children, a £700,000 buy-to-let, £500,000 in investments and £200,000 in cash and chattels.
Step 1 — Is she over the £2m taper threshold?
£2,300,000 − £2,000,000 = £300,000 over the threshold. Yes, taper applies.
Step 2 — Apply the £1-for-every-£2 reduction.
£300,000 ÷ 2 = £150,000 of RNRB lost.
Step 3 — Work out the RNRB that survives.
£175,000 − £150,000 = £25,000 of RNRB remaining.
Step 4 — What did the taper cost in tax?
£150,000 of lost allowance × 40% inheritance tax = £60,000 of extra tax that the taper alone has triggered on Margaret's estate.
Margaret still has her full £325,000 standard NRB, so her total tax-free allowance is £325,000 + £25,000 = £350,000 — not the £500,000 she would have had if the estate had stayed under £2m.
Here is the same picture across a range of single-person estate values, so you can see where you sit on the taper curve:
| Estate value | Amount over £2m | RNRB reduction (½) | RNRB remaining |
|---|---|---|---|
| £2,000,000 | £0 | £0 | £175,000 (full) |
| £2,100,000 | £100,000 | £50,000 | £125,000 |
| £2,200,000 | £200,000 | £100,000 | £75,000 |
| £2,300,000 | £300,000 | £150,000 | £25,000 |
| £2,350,000 | £350,000 | £175,000 | £0 (fully tapered) |
Where the RNRB tapers to nil: £2.35m for a single person
The maths of the cut-off is simple once you see it. The RNRB tapers away completely at the point where the reduction equals the whole £175,000. Because you lose £1 for every £2 over the threshold, you need to be £350,000 over the £2m line (because £350,000 ÷ 2 = £175,000) for the band to disappear:
£2,000,000 + (2 × £175,000) = £2,350,000
So for a single person — or anyone with only their own RNRB available — every pound of RNRB is gone once the estate reaches £2,350,000. Between £2m and £2.35m there is a brutal "marginal zone" where each extra £2 of estate value not only attracts its own 40% tax, but also strips £1 of RNRB (worth 40p of tax). Inside that band the effective marginal rate on parts of the estate can reach roughly 60% — one of the harshest tax cliffs in the UK system.
The most common mistake is valuing only the house. The £2m test uses the net value of the entire estate before reliefs and the nil rate bands. A modest home plus a healthy pension, an investment portfolio and a second property can cross £2m without anyone feeling "wealthy" — and the taper does not care how the estate is composed.
Transferred RNRB: doubles the band, but doubles the taper exposure
When the first spouse or civil partner dies, any unused RNRB can be transferred to the survivor — claimed on form IHT436 when the second person dies. In a typical case where the first death left everything to the survivor and used no RNRB, the survivor can claim a second full £175,000, giving a combined RNRB of £350,000.
That sounds like pure good news — and it is, for most families. But the taper threshold does not double. It stays at £2 million, measured against the survivor's single estate. So the taper now has more allowance to eat into:
David survived his late wife and claimed her unused RNRB, so he has £350,000 of RNRB available. He dies with an estate of £2,300,000.
Step 1 — Over £2m? £2,300,000 − £2,000,000 = £300,000 over.
Step 2 — Reduction: £300,000 ÷ 2 = £150,000 lost.
Step 3 — Remaining RNRB: £350,000 − £150,000 = £200,000.
David keeps far more RNRB than single-Margaret did on the same £2.3m estate (£200,000 vs £25,000) — because he started with a bigger band. But notice the taper still bit £150,000 off it. And because he has a larger band to lose, his RNRB does not vanish until a much higher estate value.
With a transferred band, the nil-taper point moves up accordingly. You need the reduction to reach the full £350,000, which means being £700,000 over the threshold:
£2,000,000 + (2 × £350,000) = £2,700,000
So a surviving spouse with a fully transferred RNRB keeps some residence band right up to a £2,700,000 estate, but the £2m–£2.7m marginal zone is now a wider stretch of estate value exposed to that ~60% effective rate. The doubled band is a doubled opportunity to lose allowance — which is why couples' estates in the £2m–£2.7m range are exactly where taper planning earns its keep.
Planning levers: how to get back under £2m
The taper is mechanical: it keys entirely off the estate value used for the £2m test. That makes it unusually responsive to planning, because shaving the estate below £2m can restore the whole RNRB, not just the slice you removed. Two levers do most of the work.
1. Charitable gifts in the will
Gifts to UK charities are exempt from inheritance tax and reduce the value of the estate. Crucially, charitable legacies left in the will come off the figure used for the £2m taper test, so a well-sized charitable gift can pull an estate back under the threshold and reinstate RNRB that was being tapered. There is a separate sweetener: leave 10% or more of the net estate to charity and the inheritance tax rate on the rest of the estate drops from 40% to 36% (see GOV.UK — Inheritance Tax). Charitable giving therefore attacks the bill from two directions at once. The arithmetic should always be checked by a professional, because the interaction between exempt legacies, the residue and the RNRB is easy to get wrong.
2. Lifetime gifts to drop below £2m
Giving assets away during life reduces the estate's value at death. Outright gifts to individuals are potentially exempt transfers (PETs) — fully outside the estate after you survive seven years, with taper relief on the IHT charge if death falls between three and seven years. Even before the seven years are up, a completed lifetime gift removes the asset from the death estate for the £2m taper test, which can restore RNRB. Other lifetime allowances stack on top: the £3,000 annual exemption, small gifts of £250 per person, gifts in consideration of marriage, and crucially normal expenditure out of income (regular gifts from surplus income that are immediately exempt). Confirm the current allowances on GOV.UK — Inheritance Tax on gifts, as the rules around the seven-year clock and "gifts with reservation of benefit" are full of traps.
- The RNRB is £175,000 per person; it tapers by £1 for every £2 an estate exceeds the £2,000,000 threshold.
- A £2,300,000 estate is £300,000 over, loses £150,000 of RNRB, and is left with just £25,000 — roughly £60,000 of extra tax from the taper alone.
- For a single person the RNRB tapers to nil at £2,350,000; with a transferred band it survives up to £2,700,000.
- A transferred RNRB doubles the band to £350,000 but the £2m threshold does not move — so there is more allowance to lose and a wider marginal zone.
- Charitable legacies and lifetime gifts both reduce the estate value used for the £2m test, and getting under the line can restore the whole RNRB — not just the amount removed.
- All figures are frozen to 5 April 2031, so fiscal drag pulls more estates into taper each year. Confirm your own position with a STEP-qualified adviser.
Frequently asked questions
Does the £2 million taper threshold use the value of my house or my whole estate?
Your whole estate. The £2m test uses the net value of everything you own at death — home, pensions, investments, second properties, cash and chattels — before deducting the nil rate bands. It is not limited to the house, nor to the part of the estate you leave to direct descendants. This is the single most common reason people underestimate their taper exposure.
At what estate value does the RNRB disappear completely?
For a single person with only their own £175,000 RNRB, it tapers to nil at £2,350,000 (that is £2m plus twice £175,000). For someone who has claimed a deceased spouse's transferred RNRB, giving a combined £350,000, it tapers to nil at £2,700,000.
Does claiming a transferred RNRB move the £2m taper threshold up too?
No. The taper threshold stays fixed at £2,000,000 regardless of how much RNRB you have available. A transferred band doubles your allowance to £350,000 but is still measured against the same £2m line, so the band simply takes longer to taper away — it does not start tapering later.
Can charitable or lifetime gifts really restore RNRB I've lost?
Yes, indirectly. Both reduce the estate value used for the £2m taper test. Because the taper keys entirely off that value, bringing the estate below £2m can reinstate the full RNRB — so removing, say, £300,000 from a £2.3m estate can restore the whole £175,000, not just a proportion. The planning must be set up correctly (watch the seven-year rule on lifetime gifts and gifts with reservation of benefit), so take advice.
Is the £175,000 RNRB or the £2m threshold going to rise soon?
No. Legislation in Finance Bill 2025-26 freezes the standard nil rate band (£325,000), the residence nil rate band (£175,000) and the £2m taper threshold at their current levels until the end of the 2030/31 tax year (5 April 2031). Because they are frozen rather than indexed, rising asset values push more estates into the taper zone each year.
Where do I report the RNRB and claim a transferred band?
The RNRB is claimed through the inheritance tax account when you deal with the estate; a transferred (unused) RNRB from a late spouse or civil partner is claimed on form IHT436. HMRC's residence nil rate band guidance and the IHT436 form on GOV.UK set out the conditions and how the figures are entered.
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