Inheritance Tax Act 1984 section 8FA

Downsizing addition: entitlement: low-value death interest in home

Section 8FA sets out the conditions and calculation for claiming a downsizing addition to the residence nil-rate band where a person has downsized to a less valuable home before death, and that lower-value home is in their estate at death.

• A downsizing addition may be claimed where the deceased owned a home at death worth less than their available residence nil-rate band, having previously owned a more valuable home that could have qualified
• Six conditions (A to F) must all be met, including that the former home was worth more than the current home, and that at least some other estate assets pass to direct descendants
• The addition equals the lost relievable amount (broadly, the residence nil-rate band lost through downsizing), but is capped at the value of other estate assets closely inherited by direct descendants
• A formal claim must be made for the addition, and the amount may be reduced in cases involving conditional exemption from inheritance tax