Inheritance Tax Act 1984 section 8FE

Calculation of lost relievable amount

Section 8FE sets out how to calculate the amount of residence nil-rate band that has been lost when a person downsized to a less valuable home or disposed of their home entirely before death.

• The lost relievable amount measures how much of the residence nil-rate band was effectively forfeited when the person sold or gave away a qualifying home before death, and is calculated by reference to the value of the former home and the available allowances at the time of disposal.
• A person's "former allowance" combines the residence nil-rate band in force at the time of the disposal, any transferred allowance from a deceased spouse or civil partner that would have applied at that time, and any additional brought-forward allowance that became available by the time of actual death.
• Where the person downsized rather than disposing of property entirely, the calculation compares the proportion of the allowance used up by the former home at disposal with the proportion used by the smaller home at death, and applies the difference to the allowance on death to arrive at the lost relievable amount.
• Where the disposal took place before 6 April 2017, the residence nil-rate band at the time of disposal is treated as £100,000 and any brought-forward allowance at that time is treated as nil.