Comparison · Inheritance Tax · 2026
Nil Rate Band Trust vs Transferable Nil Rate Band 2026: Which IHT Planning Route?
Before 2007, married couples used nil rate band discretionary trusts in their wills to make sure both spouses' nil-rate bands were used. The introduction of the transferable nil rate band made this largely automatic — but NRB trusts have not disappeared entirely. Here is how the two compare for inheritance tax planning in 2026, and when an NRB trust still earns its place.
TL;DR - 30-Second Summary
- - Transferable nil rate band: automatically passes unused allowance to a surviving spouse — no trust needed for the tax benefit
- - NRB discretionary trust: ring-fences assets in a will trust — still useful for asset protection, blended families, remarriage risk
- - For pure tax efficiency: most couples no longer need an NRB trust; for control and protection, some still do
Side by Side: NRB Trust vs Transferable Nil Rate Band
| Feature | NRB Discretionary Trust | Transferable Nil Rate Band |
|---|---|---|
| Mechanism | Assets placed in trust on first death | Unused % claimed by executor on second death |
| Complexity | Higher — trust deed, trustees, trust tax returns | Lower — claimed via IHT form at second death |
| Tax benefit alone | Same outcome as transferable NRB in most cases | Same outcome — achieved automatically |
| Asset protection | Yes — protects against remarriage, blended-family disputes | No — assets pass outright to survivor |
| Residence nil-rate band risk | Needs careful drafting to avoid losing RNRB | Straightforward — RNRB also transfers if unused |
| Best suited to | Blended families, asset protection goals | Simple married couples wanting straightforward IHT relief |
What Is a Nil Rate Band Trust?
A nil rate band discretionary trust is written into a will so that, on the first spouse's death, an amount up to the nil-rate band (£325,000) is placed into a discretionary trust rather than passed outright to the surviving spouse. Trustees (often including the surviving spouse) have discretion over how trust assets are used and distributed among a defined class of beneficiaries, typically the spouse and children.
Before 2007, this was the standard way for couples to make sure both nil-rate bands were used, since the first spouse's allowance was otherwise lost if everything passed to the surviving spouse (which is exempt from IHT under the spouse exemption but wastes the first NRB).
What Is the Transferable Nil Rate Band?
Since October 2007, any percentage of the nil-rate band unused on the first spouse's death can be transferred to the surviving spouse's estate. If the first spouse left everything to the survivor under the spouse exemption, 100% of their nil-rate band transfers — giving the survivor's estate a combined nil-rate band of up to £650,000 (2 × £325,000) at the second death.
This removed the tax necessity of setting up an NRB trust purely to preserve the first spouse's allowance — the same outcome is now achieved automatically, provided the executor of the second estate makes the formal claim to HMRC.
When NRB Trusts Still Make Sense
NRB trusts remain relevant for reasons beyond pure tax efficiency. In blended families, an NRB trust can ensure children from a first marriage still benefit from a defined share of the estate, even if the surviving spouse remarries or later changes their own will. Some couples also use NRB trusts as part of broader asset-protection planning, though using a trust purely to try to avoid means-tested care home fee assessments carries a real risk of being challenged by a local authority as deliberate deprivation of assets.
Anyone with an older will containing an NRB trust set up before 2007 should have it reviewed — in many cases the trust no longer serves a tax purpose and may just add administrative cost, or could inadvertently restrict access to the residence nil-rate band if not carefully drafted.
Who Should Choose What?
- - You are in a simple, first marriage with no blended-family concerns
- - You want the least administratively complex option
- - Your executor is confident about claiming it correctly
- - You are in a blended family and want to protect children's inheritance
- - You want control over how assets are used after the first death
- - You have specific asset-protection goals beyond tax
A solicitor specialising in wills and estate planning can review your existing will or help draft a new one that reflects your actual goals, rather than relying on outdated tax-planning structures.