IHTM25538 - AR/BR 100% relief allowance: transfer of unused allowance - calculation where there is a lifetime transfer
Example
Alice and her spouse James jointly own agricultural property worth £4 million. James also owned agricultural land worth £500,000, which he gifted to his daughter, Sophie, on 1 May 2025.
James died on 2 June 2026 leaving his estate to Alice.
Alice continued farming and on her death on 2 March 2027 her estate included agricultural property worth £5 million.
Alice has a 100% relief allowance of £2.5 million available to apply against her estate.
In addition, there will be a 100% relief allowance of £2 million available to transfer from James’ estate. This is calculated as follows;
Calculate the unused 100% relief allowance in James’ estate. This will be the difference between 100% relief allowance at James’ death (£2.5 million) and the 100% relief allowance used by his estate against the gift to Sophie on 1 May 2025 (£500,000).
£2.5 million - £500,000 = £2 million
Then calculate the percentage of unused relief allowance available to transfer. This is the amount of unused 100% relief allowance divided by the final allowance amount at the date of the first death.
£2 million ÷ £2.5 million = 80%
Finally calculate the survivor’s additional allowance by multiplying the percentage of unused relief allowance by the 100% relief allowance at the death of the surviving spouse or civil partner.
80% x £2.5 million = £2 million transferable 100% relief allowance is available to apply against Alice’s estate.
On Alice’s death the total 100% relief allowance available is £4.5 million, which is her own £2.5 million 100% relief allowance and the £2 million transferable 100% relief allowance.