Transferable Nil Rate Band Explained
How Married Couples Can Reduce Inheritance Tax
Inheritance tax (IHT) planning has become increasingly important for families across the UK. Rising property prices and frozen tax thresholds mean that more estates than ever are now exposed to inheritance tax.
One of the most powerful reliefs available to married couples and civil partners is the transferable nil rate band (TNRB). When used correctly, this rule can allow couples to pass up to £650,000 free of inheritance tax and potentially £1 million when combined with the residence nil rate band.
Despite its significance, the transferable nil-rate band is frequently misunderstood. Many families are unaware that they can claim unused allowances from a deceased spouse or civil partner, while others face complications due to outdated wills, trusts, or missing documentation.
What is the Nil-Rate Band?
The nil-rate band (NRB) is the threshold up to which an estate can pass free of inheritance tax.
Currently:
Standard Nil-Rate Band: £325,000
Inheritance Tax Rate Above the Threshold: 40%
For married couples and civil partners, transfers between spouses are generally exempt from inheritance tax. If the first spouse dies leaving their estate to the survivor, their nil rate band may remain unused and can later be transferred.
How the Transferable Nil-Rate Band Works
The nil rate band allows the transfer of a percentage of the unused allowance rather than a fixed amount.
Example:
If 50% of the nil rate band was used when the first spouse died, the remaining 50% can be transferred to the surviving spouse. If the nil rate band at the second death is £325,000, the surviving estate could claim an additional £162,500, increasing the total tax‑free allowance available.
How to Claim the Transferable Nil-Rate Band
Executors normally claim the transferable allowance using Form IHT402. The claim must usually be made within 24 months of the end of the month in which the second death occurs.
Typical supporting documents include:
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death certificate of the first spouse
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marriage or civil partnership certificate
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copy of the first spouse’s will
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grant of probate or letters of administration
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details of any deed of variation
Cases:
Changes to Inheritance Tax Rules from 2025
The UK inheritance tax system is undergoing significant changes.
From 6 April 2025, the traditional concept of domicile for inheritance tax purposes will be replaced with a residence-based system. Under the new rules, an individual will generally be treated as a long-term UK resident if they have been a resident in the UK for 10 out of the previous 20 tax years.
Long-term residents will be subject to inheritance tax on their worldwide assets. Although the residence rules are changing, the transferable nil rate band will continue to apply to spouses and civil partners regardless of their residence status.
However, international estates may become more complex, making specialist advice increasingly important.
Why Professional Inheritance Tax Planning is Important
Inheritance tax planning is rarely straightforward.
Modern estates often involve:
property portfolios
family trusts
international assets
complex family structures.
Without careful planning, families may pay significantly more tax than necessary.
Professional inheritance tax advice can help ensure that:
available allowances are fully utilised
estate structures remain tax efficient
future disputes with HMRC are avoided
Inheritance Tax Planning with Wills, Tax & Trusts Ltd.
At Wills Tax & Trusts Ltd., we specialise in detailed inheritance tax planning for individuals and families across the UK.
Our services include:
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comprehensive inheritance tax planning
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wills and estate structuring
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trust creation and administration
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succession planning for family wealth.
By carefully reviewing your financial position, family circumstances, and long-term goals, we help ensure that your estate is structured in the most tax-efficient way possible.
With inheritance tax rules continuing to evolve, professional guidance can make a substantial difference to the wealth passed on to future generations.