Think selling your home means losing inheritance tax relief? Think again…
Many people assume that once they sell their home, move into care, or downsize to a smaller property, they lose their right to the Residence Nil Rate Band (RNRB) – the valuable inheritance tax allowance available when an estate is left to direct descendants.
This is not the case. Thanks to a rule called the Downsizing Addition, estates may still qualify for this relief, even if no property is owned at the time of death. And the savings can be significant.
How the Downsizing Addition Works
If you ever owned a home that would have qualified for the RNRB, your estate can still claim the allowance even if you:
- Sold your home
- Downsized to a smaller property
- Moved into rented accommodation
- Gifted the property away
- No longer own a property at all
As long as assets are left to your direct descendants, your estate may still be entitled to the same allowance you would have received had you kept the property. This rule applies to anyone who disposed of a home after July 2015.
A Simple Example
Imagine you sold your home a few years ago and now live somewhere smaller or rented. If you pass away without owning a property but leave your estate to your children, your estate may still be able to claim up to:
- £175,000 (for an individual)
- £350,000 (for a couple)
…in extra tax‑free allowance, even without a house.
This relief is often missed, meaning many families end up paying far more inheritance tax than necessary.
Why Most People Never Hear About This
The rules are detailed and often overlooked. Executors rarely know that:
- Old home ownership records can be used to claim relief
- A previous property sale can still unlock the allowance
- Downsizing can still qualify
- Not owning a home at death does not mean losing the allowance
Without proper guidance, the downsizing addition can be easily overlooked, but the resulting tax savings can be substantial.
Check If You Qualify
If you or a family member have:
- Sold a property
- Moved into care
- Downsized
- Gifted a home
- Or no longer own a property
…your estate may still qualify for this valuable inheritance tax relief.
Final Thought
Inheritance tax planning can be complex, but opportunities like the Downsizing Addition can make a real difference.
Learn how our asset protection services can safeguard your future. Our dedicated team is skilled in navigating even the most complex situations. If you’d like advice tailored to your situation, please get in touch with Garner & Hancock Solicitors directly.
Written by: Massimo Cairo, Trusts & Estates Executive
