Does Your Will Protect Your £175,000 Inheritance Tax Home Allowance?

General information only — not legal or tax advice. For guidance specific to your circumstances, please speak with a qualified estate planning professional.

Most People Are Already Fine — But It's Worth Knowing This

If you're a UK homeowner, you've probably come across the headline figure: a married couple can pass on up to £1 million free of inheritance tax.

But that £1 million isn't automatic. It's made up of two separate allowances — the standard nil rate band of £325,000 per person, and an additional £175,000 per person specifically tied to your home. This second allowance is known as the Residence Nil Rate Band, and understanding whether your Will is set up to claim it could make a very significant difference to what your family inherits.

The good news is that for most people, there's nothing to worry about. If your estate is worth less than £2 million, you own a home, and your Will leaves everything straightforwardly to your children, you are very likely already qualifying for this allowance without needing to do a thing.

This article explains how the allowance works, who qualifies, and the one situation where an older Will could quietly put it at risk.

What Is the Residence Nil Rate Band?

The Residence Nil Rate Band — sometimes called the home allowance — is an additional inheritance tax-free allowance of £175,000 per person, available when a qualifying residential property is left to direct descendants.

For a married couple, both allowances are transferable. That means if one spouse dies without using their allowance, it passes to the surviving spouse — giving a combined potential allowance of £350,000 specifically for the family home, on top of the standard nil rate band.

Combined, a married couple can potentially pass on up to £1 million free of inheritance tax — but only if the right conditions are met.

Who Counts as a Direct Descendant?

To qualify for the Residence Nil Rate Band, the property must be left to direct descendants. Simply put, that means your children and grandchildren — including stepchildren, adopted children, and children for whom you were a court-appointed guardian when they were under 18.

What If You've Downsized or Moved Into Care?

You don't need to own your home at the time of death to benefit from this allowance. If you sold your home, downsized, or moved into a care home, there are specific provisions that can preserve the allowance — provided you lived in the property as your main home at some point and certain conditions are met.

What About Larger Estates?

It's worth knowing that the Residence Nil Rate Band begins to taper for estates worth more than £2 million. For every £2 over that threshold, the allowance reduces by £1. For very large estates, it may not be available at all. If your estate is approaching or exceeding that figure, it's worth taking professional advice.

The Situation Worth Being Aware Of: Discretionary Trusts

For most people reading this, the allowance is already protected. But there is one situation that's worth being aware of — particularly for anyone with an older Will.

Wills written 10 to 15 years ago often included something called a Discretionary Trust. These were widely used at the time, and the intentions behind them were genuinely good — protecting assets from potential divorce, bankruptcy, or other unforeseen circumstances affecting beneficiaries.

The issue is that because a Discretionary Trust gives the people looking after it some flexibility over who ultimately benefits, HMRC can take the view that the property hasn't been inherited in quite the way the rules require. In that situation, the £175,000 per person Residence Nil Rate Band could be at risk.

If this applies to you, it isn't necessarily the end of the story. There may be options available to put things right — but they are time-sensitive and do require proper professional guidance.

For a married couple, the combined allowance is £350,000. At 40% inheritance tax, that represents up to £140,000. It's simply worth knowing whether your Will is structured in a way that protects it.

What Should You Do Next?

If your Will was written more than five years ago, or if you're unsure whether it includes a Discretionary Trust, a straightforward Will review is a sensible starting point.

At Westwood Estate Planning, we offer a free, no-obligation 15-minute chat to help you understand where you stand. No jargon, no pressure — just a plain English conversation so you can feel informed and confident about your family's future.

Book your free 15-minute chat here: https://calendly.com/westwoodep/chat