The Transferable Nil-Rate Band
How Couples Can Pass on up to £1 Million Between Them, and the Rules That Decide Whether They Can
Inheritance tax planning has become a concern for more UK families than ever — rising property values combined with allowances that have been frozen for years have brought many estates within reach of the tax for the first time. For married couples and civil partners, however, one of the most valuable reliefs available is the Transferable Nil-Rate Band (TNRB).
Used correctly, the TNRB allows couples to pass up to £650,000 between them free of inheritance tax — and, when combined with the Residence Nil-Rate Band, potentially up to £1 million. Despite its value, it's also one of the most frequently misunderstood reliefs in the UK tax system. Older wills, well-intentioned trust planning from a previous era, and missing documentation routinely cause families to lose part — or all — of the allowance to which they were entitled.
What is the Nil-Rate Band?
The Nil-Rate Band (NRB) is the threshold up to which an individual's estate can pass free of inheritance tax. The position is straightforward:
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The current Nil-Rate Band is £325,000 per individual.
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Estates above this threshold are taxed at 40% on the value above the band (or 36% where 10% or more of the net estate is left to charity).
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Transfers between spouses and civil partners are generally exempt from inheritance tax, regardless of value.
It's that last point — the spouse exemption — that creates both the opportunity and the trap that the transferable nil-rate band addresses.
Why the Transferable Nil-Rate Band Exists
When a first spouse dies and leaves everything to the survivor, no inheritance tax is payable on the first death — but, historically, the first spouse's NRB went entirely unused. The system before 2007 effectively penalised straightforward "all to my spouse" wills, leaving only one NRB available on the second death.
The introduction of the Transferable Nil-Rate Band in October 2007 fixed this. Now, any unused portion of the first spouse's NRB can be transferred to the survivor and used on the second death — meaning most couples can have a combined £650,000 of NRB available, regardless of how the first spouse's will was structured.
How the Transfer is Calculated - By Percentage, Not By Amount
A critical point that often catches families out: the TNRB transfers as a percentage of unused allowance, not as a fixed pound figure.
So if 50% of the first spouse's NRB was used (for example, by a £162,500 gift to a child while the rest passed to the surviving spouse), only 50% can be transferred. On the second death, that 50% is applied to the then-current NRB.
A worked example: the first spouse died in 2010 when the NRB was £325,000, with 60% of the band used by bequests to children and 40% passing to the surviving spouse and so unused. When the surviving spouse later dies — say, today, when the NRB is still £325,000 — their estate has its own £325,000 NRB plus 40% of the current NRB transferred (£130,000), giving a total tax-free allowance of £455,000.
This percentage-based approach means that even where the NRB has changed since the first death, the survivor benefits from the current value of the unused portion. It's a real strength of the system — but only when the original calculation was correct in the first place.
How to Claim the Transferable Nil-Rate Band
The TNRB is not automatic — it must be claimed by the executors of the surviving spouse's estate, typically using Form IHT402, within 24 months of the end of the month in which the second death occurs.
Supporting documents normally needed include:
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The death certificate of the first spouse.
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The marriage or civil partnership certificate.
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A copy of the first spouse's will (and any deed of variation).
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The grant of probate or letters of administration for the first estate.
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Details of any chargeable transfers made by the first spouse before their death.
Where the first death was many years ago — sometimes decades — documents can be hard to track down. HMRC accepts claims made to the best of executors' ability where records don't exist, but the process is significantly smoother if these documents have been kept together with the will itself. Many families discover too late that they should have done so.
The Most Common Reason Families Lose Part of the TNRB
The single most common cause of a partial or lost TNRB claim isn't fraud or error — it's older wills that contained Nil-Rate Band Discretionary Trusts (NRBDTs). These were widely used before 2007 specifically to ensure that the first spouse's NRB wasn't wasted by directing the value of the NRB into a discretionary trust on the first death rather than passing it outright to the survivor.
Before 2007, this planning was essential. After the TNRB was introduced, it became largely unnecessary for pure tax saving because the unused band could simply be transferred. But where these older wills weren't updated, the trust on the first death uses up the first spouse's NRB — meaning no TNRB can be transferred on the second death because there's nothing left to transfer.
The result is families who think they have two full nil-rate bands available, only to discover the first one was consumed by a trust that was set up when the planning landscape was very different. We cover the wider role of these trusts on our dedicated Nil-Rate Band Trusts page — including the situations in which they still make sense, such as for blended families or where bloodline protection matters more than maximum tax efficiency.
If you have a will from before 2007 — particularly one drafted by a high-street firm at a time when NRBDTs were the standard recommendation — a review is well worth doing. Modern planning may achieve the same goals more flexibly and may preserve the TNRB that the older arrangement would have eliminated.
TNRB and RNRB
When Chargeable Transfers Reduce the TNRB
Other transfers can also use part of the first spouse's NRB and so reduce the percentage available for transfer:
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Lifetime chargeable transfers in the seven years before the first spouse's death (typically gifts into trusts that weren't covered by exemptions).
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Specific bequests to non-exempt beneficiaries in the will (children, friends, charities other than UK-registered ones, and so on, beyond available exemptions).
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Gifts with a reservation of benefit that fall back into the estate on death.
Only transfers that are fully exempt — most importantly, gifts between spouses and to qualifying UK charities — leave the NRB untouched and the full percentage available for transfer.
How the TNRB Interacts with the Residence Nil-Rate Band
The Residence Nil-Rate Band (RNRB) — currently £175,000 per person — is also transferable between spouses on broadly similar principles. A married couple can therefore potentially have:
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2 × £325,000 NRB = £650,000
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2 × £175,000 RNRB = £350,000
Combined: up to £1 million tax-free.
Both transferable bands need to be claimed correctly, and both can be eroded by the same kinds of planning mistakes. We cover the RNRB rules in detail on our Residence Nil-Rate Band guide, including the £2 million taper that can eliminate the RNRB for higher-value estates.
Why a Will Review is So Often Worthwhile
A surprising number of older wills contain provisions that no longer fit the current law — typically because they were drafted before the TNRB existed, before the RNRB existed, or before the most recent waves of inheritance tax change. The consequences range from a partly-lost TNRB to a completely lost RNRB and can run to hundreds of thousands of pounds in unnecessary tax.
A periodic will and IHT review — particularly if your will was drafted more than ten years ago, contains a nil-rate band trust, or pre-dates the introduction of the RNRB in April 2017 — is one of the most consistently valuable pieces of planning we do.
Talk It Through With Us
If you want to know whether your existing arrangements will produce the TNRB result you expect — or whether an older will is quietly costing your family one of the most valuable IHT allowances available — we'd be glad to take a look.