Residence Nil Rate Band - when can be used?

[nipabc]

Hi - really confused by this as didn't know it existed until a friend mentioned it!
My DFIL died recently & I'm trying to work out if any IHT will be due but don't understand if this is applicable
DMIL predeceased him & as everything in joint names he inherited everything
Hence I assume that her £325k threshold can be added to his to give him a limit of £650k?
However is he entitled to further £175k RNRB?
Estate being inherited by by DH & siblings
Only reason estate is possibly more than £650k is due to value of house (more than ours!) due to where they live as they have minimal savings
Any advice appreciated. Many thanks!

The estate can use the unused NRB of his late wife too.

If the property is being left to his direct descendants, he is entitled to £175k RNRB plus his wife's unused RNRB. On the information you've posted, there will be no IHT to pay unless to total estate exceeds £1M.

Thank you very much for helpful replies
Maybe I'm being stupid but why is it like this with a "separate" RNRB?
Isn't this the same as saying the IHT threshold is actually £500k not £325k?
Thanks

No, it isn't the same. The £325k nil rate band applies regardless of what is being left and who it is being left to. The RNRB is only available if the family home is being left to the deceased's children or grandchildren and can only be used against property.

If, for example, someone dies leaving a house worth £150k which they leave to their children, their total nil rate band will only be £475k. And if they leave the house to their nephew, the RNRB won't be available at all.

Thank you, much clearer!

Came on to answer this but prh47bridge has as always nailed it!

I’m trying to sort probate for my Mum and in a similar situation but I still don’t see how, with all the forms I have to fill in, that it can come out to £1 million threshold. I called the IHT helpline who said that as there is a property involved then I have to have an IHT number and complete the forms, which I am doing. But it asks for the IHT limit at the time of my Dad’s death, which in 1999 won’t be £325,000. My work is really not helped by my Mum having bits of money all over the place - I’m now up to 7 bank accounts with varying amounts of money in them.

It works out at £1M because you take the percentage of your father's IHT entitlement that wasn't used and apply it to the current IHT threshold. His entitlement in 1999 would have been £223,000 or £231,000 depending on when he died. If he didn't use any of that, there is £325,000 to be passed on to your mother.

Hit Post to early...

In the same way, even though the RNRB hadn't been invented when your father died, he has £175k RNRB to pass on to your mother. So, if your mother has left the family home to her direct descendants and it is worth at least £350k, and assuming your father did not use any of the IHT nil rate band, there will be no IHT to pay on her estate unless it is worth more than £1M.

@prh47bridge thank you so much!

His probate paper says “under £200,000.”

What probate paper?

Sorry, the grant of probate.

@prh47bridge I think I am being dim here. I’m completing IHT402. Inheritance tax nil rate band in force at the time of my father’s death was £223,000. But it seems this is the only amount available for transfer, not £325,000?

In box 18 you put box 11 minus box 17 (the PDF version of the form does this for you). If box 17 is 0 and box 10 is 0, box 19 is 100%, box 20 is £325,000 and box 21 is £325,000. That is the amount of nil rate band you are transferring to your mother. However, if your father left some of his estate to people other than your mother or made significant gifts in the 7 years prior to death, you will have less than £325k available to transfer as your father will have used some of it himself.

Thank you @prh47bridge but if box 11 is £223000, box 10 and box 17 are zero, how does that make box 20 and 21 £325000 and not £223000? Or if I do it online does it automatically make it £325000? (I am currently doing it on paper.)

@prh47bridge ignore me, I am being exceptionally dim today. I now see how it works, and thank you so much for this. I’m really very grateful.