From today individuals will be able to set any unused nil rate band on their
spouse’s death against their own estate in addition to their personal nil
An estate is not subject to inheritance tax if it is within the nil rate
band (currently £300,000). Transfers between spouses are generally free of
inheritance tax. If an individual simply leaves all their estate to their
surviving spouse then the nil rate band is effectively wasted. Many married
couples have in the past drawn up relatively complex wills to ensure that
the nil rate is used on the first death.
The new rules allow a surviving spouse or civil partner to use any nil rate
band that their spouse, or civil partner, did not use against their
inheritance tax estate, in addition to their own nil rate band.
The new rules apply to deaths after today, so they are in part retrospective
as unused nil rate bands arising on deaths before today can be added to the
nil rate bands of surviving spouses, or civil partners, dying after today.
Mr Jones died in May 2007 having made no chargeable transfers. He left his
entire estate to Mrs Jones. Mrs Jones dies in March 2008 and can set
£600,000 of nil rate bands against her inheritance tax estate.
This is a very
welcome change which will give a significant relief to married couples
and those in civil partnerships allowing them to simplify the way they
distribute their estates on the first death.