IHTM25532 - AR/BR 100% relief allowance: transfer of unused allowance- focus is on extent to which the 100% relief allowance is unused
Where on the death of the first spouse or civil partner some of the 100% relief allowance was unused, the unused 100% relief allowance can be transferred to the surviving spouse or civil partner.
Where the first spouse or civil partner died before 6 April 2026 the full 100% relief allowance is transferable. The 100% relief allowance will not have been used.
For deaths on or after 6 April 2026, while the benefit of the unused 100% relief allowance passes to the estate of the surviving spouse or civil partner, assets, including business or agricultural property assets, do not need to have passed to the spouse or civil partner on the first death. As long as not all of the 100% relief allowance was used on the first death, the amount that was unused can pass to the surviving spouse or civil partner.
The amount that can be transferred is the difference between the total 100% relieved amount and the final allowance amount of the first spouse or civil partner to die.
The total 100% relieved amount is the amount by which the chargeable transfers made by the first spouse or civil partner are reduced by 100% business property or agricultural property relief. This applies to all chargeable transfers made by them in the seven-year period ending on the date of death, including the transfer on death.
The final allowance amount is the amount of the 100% relief allowance in effect at the date of the first death.
The estate of the first spouse or civil partner does not have to include any property qualifying for business property or agricultural property relief for the transferable 100% relief allowance to be available.
Assets passing as an exempt transfer (for example, a transfer to charity or for national purposes) do not use up the 100% relief allowance.
Example 1 - first death before 6 April 2026
Wife died on 4 January 2005. Husband dies on 7 April 2026. The available 100% relief allowance available to transfer is £2.5m because the first spouse died before 6 April 2026 (IHTA1984/S124E and Finance Act 2026 Schedule 12 paragraph 16).
Example 2 - both deaths after 6 April 2026
On the first death on 5 May 2027, the estate was valued at £425,000. The estate included unquoted shares (which are not traded on any recognised stock exchange) worth £100,000 that qualified for 100% business relief.
The IHT threshold is £325,000 and this amount was left to the son. The unquoted shares were left to charity. The full £2.5 million unused 100% relief allowance would be available to transfer to the surviving spouse or civil partner.