Inheritance Tax Act 1984 section 8FD

Downsizing addition: effect: section 8F case

Section 8FD explains how the downsizing addition works as the residence nil-rate amount when no part of the deceased's home passes to direct descendants, and how any unused portion may be carried forward to a surviving spouse or civil partner's estate.

• Where the deceased downsized or disposed of a home and no part of it passes to direct descendants, the residence nil-rate amount equals the downsizing addition rather than being nil.
• If the downsizing addition fully uses the available allowance (default allowance where the estate is at or below the taper threshold, or adjusted allowance where it exceeds it), nothing is available for carry-forward.
• If the downsizing addition is less than the available allowance, the shortfall can be carried forward for use against a surviving spouse or civil partner's estate.
• The applicable allowance depends on whether the estate value exceeds the taper threshold: if it does, the adjusted (tapered) allowance applies; if not, the full default allowance applies.