Inheritance Tax Act 1984 section 8D

Extra nil-rate band on death if interest in home goes to descendants etc.

Section 8D introduces an additional inheritance tax nil-rate band — the residence nil-rate band — that applies when a person dies on or after 6 April 2017 and their home passes to direct descendants, and sets out how the additional tax-free amount is calculated, including tapering for larger estates.

• An additional residence nil-rate band applies on death from 6 April 2017, charged at 0%, meaning no inheritance tax is payable on the portion of the estate covered by this allowance.
• The residential enhancement is £100,000 for 2017–18, rising by £25,000 each year to £175,000 for 2020–21 and subsequent years, and is combined with any unused allowance brought forward from a deceased spouse or civil partner to form the total default allowance.
• Where the value of the deceased's estate exceeds the taper threshold of £2,000,000, the available residence nil-rate band is reduced by £1 for every £2 of excess, and can be tapered to nil for sufficiently large estates.
• From 2021–22 onwards, both the residential enhancement and the taper threshold are subject to annual uprating in line with the consumer prices index, with the Treasury required to specify the amounts each year by statutory instrument.