Taking Account

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Inheritance tax boost for certain couples

November 2007

If you are a widow, a married couple, or have entered into a Civil Partnership, you may benefit from the change to IHT rules on 9 October 2007.

Essentially when the first partner/spouse dies the percentage of any unused nil rate band allowance can be transferred to the surviving partner/spouse to be applied to the second estate.

If on the first death there was no chargeable estate (perhaps because the whole estate was left to the surviving spouse), all of the deceased person's nil rate band (currently £300,000) would become available to the survivor on their death. On the survivors death this would essentially double the amount of their estate that would be exempt from IHT.

Alternatively, if on the first death the estate was valued at £150,000, currently 50% (£150,000/£300,000) of the unused nil rate band would be available to transfer to the surviving spouse. If the nil rate band at the time of the second death was £400,000, then an extra £200,000 (£400,000 x 50%) would be available to offset against the estate on the second death.

Hilton Sharp & Clarke