Inheritance Tax Planning for Families With Multiple Properties
By Georgia Holmes
Discover how owning multiple properties can affect Inheritance Tax, including the residence nil-rate band, gifting property, rental investments and practical ways to plan your estate.
Owning more than one property can help families build wealth, generate rental income and provide financial security for future generations. However, a property portfolio can also create Inheritance Tax (IHT) challenges when it comes to passing wealth on.
Whether you own your family home and a holiday property, have buy-to-let investments or have inherited a share of a family property, it is important to understand how these assets may be taxed and what planning options are available.
With the right preparation, you can make informed decisions about your properties, understand the potential tax liability and help ensure your estate is passed on according to your wishes.
How does Inheritance Tax apply to multiple properties?
Inheritance Tax is generally calculated on the value of a person’s estate when they die, after taking account of relevant debts, exemptions and reliefs. Property is usually included in the estate, whether it is a main residence, a second home or a rental property.
For the 2026/27 tax year, the standard IHT nil-rate band is £325,000. This is the amount an individual can generally pass on without IHT, subject to the rules and their circumstances. The standard IHT rate is 40% on the taxable amount above the available threshold.
For example, if someone leaves an estate worth £900,000 and has a £325,000 nil-rate band available, some of the estate may be subject to IHT. The actual liability will depend on factors such as who inherits the assets, whether any exemptions apply and whether the estate qualifies for additional allowances.
Property values can make a significant difference. A family home that has increased in value over several decades, combined with one or two rental properties, could push an estate above the available thresholds even if the owner has relatively little cash or other accessible savings.
This can create a practical challenge: an estate may need to pay a tax bill even though much of its wealth is tied up in property.
Can you claim the residence nil-rate band if you own several properties?
The residence nil-rate band (RNRB) is an additional IHT allowance that may be available when a qualifying home is passed to direct descendants, such as children, grandchildren or adopted children.
The maximum allowance is £175,000 per person, subject to the qualifying conditions. It can be reduced or lost for estates worth more than £2 million. An unused allowance may be transferable to a surviving spouse or civil partner, subject to the rules.
Crucially, owning several properties does not mean you can claim the residence nil-rate band for each one. Only one qualifying residence can be used for the allowance, and the person must have lived in the property at some point. A buy-to-let property that was never their home will not normally qualify.
If you have a main residence and a holiday home, the rules can be more complicated. Your estate may need to identify which property is eligible and consider how it is left in your will. If you have sold or downsized…