Optimum IHT Downsizing Relief Claim

IHT Residence Nil Rate Band (RNRB) - Timing of Sale of Widow's Home After Her Move to Nursing Home

Didn't find your answer?

Just had this query thrust upon me for potential new widowed client.

She was widowed around the year 2000 and has just moved into a nursing home for the first time.

Residence Nil Rate Band (RNRB) increases as follows:

For deaths in 2018/19 £125,000

For deaths in 2019/20 £150,000

For deaths in 2020/21 £175,000

It is assumed her house will sell for around £225,000 and can be sold either this 2019/20 or 2020/21 tax year.

I have applied the HMRC example for "Ruth" towards the bottom of



If widow were to die in 2020/21 it would appear that downsizing relief would be as follows:

Sale of home in 2019/20 - £350,000 x (approx) 69% = £242,300

Sale of home in 2020/21 - £350,000 x (approx) 64% = £225,000

So, it seems that deferring the sale to a later tax year results in the strange anomaly of less downsizing relief being due. The reason for this is that in the fraction:

Sale proceeds/Total additional threshold (AT)

where sales proceeds is a constant and the denominator increases each tax year (the widow's total AT increases each tax year that a sale is deferred) (See Steps 1 and 2 of the HMRC calculation for "Ruth"),

  the percentage (% ) of AT "lost" or claimable decreases over time.

The other anomaly is that the downsizing relief can exceed the sale value of the house. So it seems that selling a house before death can result in effectively more IHT relief for the house than would have been the case had the house been owned at death.

Do readers agree with these conclusions.

Client's family are keen to sell sooner rather than later. Are there any tax or other reasons to defer the sale of the widow's house now she is in a nursing home.

One variable which could increase the amount of IHT relief is the RNBR increases for 2021/22 and after in line with the increases in the CPI.

By the way, I am aware of the final period 18 to 36 month CGT extension for a disposal of a house by a disabled person or a person in a care home.


Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.