A person's estate on death is usually free of Inheritance Tax (IHT) up to a certain limit, known as the Nil Rate Band (NRB). The NRB is £325,000 for 2010/11, which is now fixed, subject to future Budgets, until 2013/14.

However, in certain circumstances, the NRB can be reduced; for example, where gifts are made within seven years of death. It may also be possible for the NRB to be increased by up to 100% (to £650,000), ie the unused NRB of the first spouse/civil partner to pass away is effectively 'transferred' for use in the estate of the surviving spouse/partner where:

  • the deceased died after 12 November 1974
  • their entire estate is left to the surviving spouse/partner, and 
  • the surviving spouse/civil partner is domiciled in England and Wales.

The calculator below will help a surviving spouse/civil partner to estimate the value of the "transferable Nil Rate Band" available in a scenario similar to that provided in the example below. However, it should only be used as a guide and is not a substitute for obtaining specific advice on the issue, which we would always recommend.

Please complete the requested information below in respect of the estate of the first spouse/civil partner who has already died. You can then use the resulting figure in the Inheritance Tax calculator to estimate the IHT payable on the surviving spouse/civil partner's estate.

The value of assets/legacies that passed to anyone other than spouse or charity under the Will or by survivorship Enter the total value of assets and legacies passing under the Will or intestacy of the spouse/civil partner who died first to anyone apart from the surviving spouse/civil partner or charity. Assets owned jointly with anyone apart from the spouse/civil partner should be included here.
The value of other assets (click in value field for a more detailed definition) Enter the value of other assets that were considered part of the estate of the spouse/civil partner who died first because they were: a) a share of assets jointly owned by the spouse or civil partner who died first excluding assets that passed to the survivng spouse or civil partner, b) assets held in trust to which the spouse or civil partner who died first was entitled to benefit, or c) gifts with reservation made by the spouse or civil partner who died first.
Nil Rate Band in force at date of death of the surviving spouse/civil partner Enter the nil rate band in force at date of death of the spouse/civil partner who died first (refer to nil rate bands for previous years)
Total chargable value of gifts and other transfers of value seven years before death Enter the total chargeable value of gifts and other transfers of value made by the deceased spouse/civil partner within the last seven years prior to his/her death.
Percentage by which surviving spouse/civil partner's Nil Rate Band is to be increased
Estimated value of transferable Nil Rate Band available to the surviving spouse's/civil partner's estate

 

example

If Person A dies and leaves everything they own to their surviving spouse or civil partner (Person B), there will usually be no IHT to pay by Person A's estate (as long as the Person B is considered to be domiciled in the England and Wales). Because Person A's estate is free of IHT, Person A will not have used any of their own IHT NRB. In these circumstances this unused NRB allowance from Person's A estate is available to increase the NRB of Person B when they die, even if they have remarried or entered into a further civil partnership.

The threshold can only be transferred on the second death, which must have occurred on or after 9 October 2007. It does not matter when the first spouse or civil partner died provided it was after 12 November 1974. If the first death was before this date, then the full NRB may not be available to transfer. You will need to take specific advice in these circumstances because the rules are complicated.

For further information or to talk to someone about a specific matter, please contact a team member in the office nearest you:

Rachel Brooks, partner and head of Private Client Services group in our Portsmouth office, on 023 9228 2714 or at rachel.brooks@bllaw.co.uk.

James Antoniou, partner in our Oxford office, on 01865 254286 or at james.antoniou@bllaw.co.uk.

Fiona Fox, solicitor in our Southampton and Portsmouth offices, on 023 8085 7282 / 023 9228 2748 or at fiona.fox@bllaw.co.uk.

Douglas Smith, partner in our London office, on 020 7814 5438 or at douglas.smith@bllaw.co.uk.

Alternatively, email our general enquiries helpdesk on privateclientinfo@bllaw.co.uk.