IHT: Claiming a Transfer of the Unused Nil Rate Band

Inheritance Tax (IHT), allowances and reliefs are available individually to each taxpayer. Because transfers of assets between spouses or civil partners normally have no tax consequences for IHT purposes, it is easy to fall into the trap of thinking that there is nothing which needs to be done when doing so or when passing over the unused proportion of the IHT ‘tax-free’ allowance in the event of one partner’s death. However, when the estate of the last surviving partner has to be administered, information and some documents are required.

The personal representatives of the deceased will be required to supply a claim for the unused nil rate band and to back up that claim with the following documents relating to the late spouse or civil partner:

• A copy of the grant of probate or letters of administration, or a copy of the death certificate if there was no grant of probate or letters of administration;
• A copy of the Will (if any);
• A copy of any Deed of Variation or similar document which brought about any change in the way in which the estate was due to be distributed.

It is widely thought that the ‘excess’ of unused transfers (i.e. the difference between the transfers made and the ‘nil band’ at the date of death) simply passes across to a surviving spouse or civil partner, but this is not the case. The way the transfer works is quite different.

It is recommended that the required documents are assembled and stored in a safe place with your will.