I recently lost my husband and am in the process of selling our family home. I will be staying with my daughter or renting somewhere until I can find a smaller house to buy. If I were to die before buying the new house, would I lose the combined residence nil-rate band (RNRB) of £350,000 that I was allowed, or would it be applied retrospectively to the house that I am currently selling?  

Arthur Weller replies: 

As you wrote, it would be applied retrospectively to the house that you are currently selling under the downsizing provisions, if your will stipulates that the proceeds are ‘closely inherited’ by lineal descendants (e.g., adult offspring). See HMRC’s Inheritance Tax Manual at IHTM46050, which states: ‘Although the idea behind RNRB is that the deceased’s home is left to their direct descendants, it was recognised that people who had downsized to a less valuable property in later life, or who had sold their home when they moved into care, might lose some or all of their entitlement to RNRB. The downsizing provisions provide a way for any RNRB that might otherwise have been lost due to the disposal or downsizing to be reinstated, as long as other assets are closely inherited (IHTM46013). This amount is called the downsizing addition.’ See also the subsequent pages in HMRC’s guidance.