HMRC have launched a quick consultation, closing on 16 October 2015, as to how the new residence nil rate band (RNRB) should be introduced so that individuals are not disincentivised from downsizing or selling their property.
Broadly, the current proposal is for the RNRB to continue to be available where the deceased has downsized, disposed of, or gifted away their residence, and has left a smaller residence and/or assets with an equivalent value to direct linear descendants.
The initial downsizing or disposal must have happened since 8 July 2015, but there can be a number of downsizing moves between that date and the date of death.
HMRC's consultation document includes a number of examples as to how the proposals would work.
HMRC technical note: Inheritance Tax on main residence nil-rate band and downsizing proposals: technical note
Our guide to the Main residence nil rate band (RNRB)