We Have No Children – Can We Still Make Use of the New Main Residence Allowance?

My wife and I have been happily married for 30 years but we were never able to have children. We’ve built up a reasonable estate over the years which we’d like to leave to our nephews and nieces. However, it seems that the new main residence allowance doesn’t extend to this kind of transfer. Can this be true?

Question asked by Paul Koppel

Unfortunately, as it stands, the new main residence allowance or main residence nil-rate band (MRNRB) won’t be applicable to family members that aren’t direct descendants.

When the new allowance came into force in April of 2017 it will initially extended a £100,000 allowance to every UK resident who left their main residence to one of their children (including adopted, foster or step children), their grandchildren or to their children in joint names with their respective spouses.

Main Residence Nil-Rate Band and Childless Couples

This means that by the 2020 tax year, when the main residence allowance has risen to £175,000, the average childless couple will be £350,000 worse off than couples with just a single child when it comes to inheritance tax. Any unused main residence allowance can also be passed between spouses, although this will also be redundant for childless couples.

For the time being, those who don’t have direct descendants to whom they can leave their main residence will be unable to make use of this allowance.

Although the inequity of this suggests that we might see the law amended at some point in the future, for now those unable to make use of the new nil-rate band will find themselves facing larger potential inheritance tax bills than their peers and will need to act accordingly.

I’ve held a policy with Drewberry for several years now. They are always friendly, insightful and offer great service.

Dan Pettitt
13/01/2021
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