Glossary · UK
What is Transferable Nil Rate Band?
A rule allowing a surviving spouse or civil partner's estate to claim any percentage of the Inheritance Tax nil rate band unused on the first death, potentially doubling their own nil rate band to up to £650,000.
Full Definition
The transferable nil rate band allows the unused proportion of a deceased person's Inheritance Tax nil rate band (currently £325,000) to be transferred to their surviving spouse or civil partner's estate, to be claimed on the second death in addition to the survivor's own nil rate band. Because most estates passing entirely between spouses or civil partners on first death benefit from the unlimited spousal exemption and therefore use little or none of the deceased's own nil rate band, this rule -- introduced in October 2007 -- prevents that unused allowance from simply being wasted, recognising that a couple's combined wealth is often intended to benefit the survivor first and their children or other beneficiaries only on the second death. The transfer works on a percentage basis rather than a fixed cash amount: if the first spouse to die used, say, 40% of their nil rate band (for example through gifts to non-exempt beneficiaries within seven years of death, or a partial gift to someone other than the surviving spouse), the remaining 60% can be transferred and applied to increase the survivor's own nil rate band by 60% of whatever the nil rate band is at the time of the second death -- meaning the cash value of the transferred amount is fixed by the rate in force when the survivor dies, not when the first spouse died. Where a couple's residence nil rate band is also being claimed, an equivalent transferable residence nil rate band operates in parallel, and both must be claimed separately by the executors of the second estate using the correct HMRC forms, referencing details of the first death, within the normal Inheritance Tax reporting deadlines. Worked example: a husband dies leaving his entire estate to his wife under the spousal exemption, using none of his £325,000 nil rate band; when his wife later dies, her estate can claim both her own full £325,000 nil rate band and the 100% unused nil rate band transferred from her husband, giving a combined nil rate band of £650,000 before Inheritance Tax is due on her estate, on top of any residence nil rate band and transferable residence nil rate band also available if a home is left to direct descendants -- a straightforward doubling that requires no advance planning beyond the executors correctly claiming the transfer on the second death.