IHTM25540 - AR/BR 100% relief allowance: transfer of unused allowance - calculation where the survivor was married to, or in a civil partnership with, someone who was entitled to 100% transferable allowance where no claim was made on the earlier death

A claim to transfer unused 100% relief allowance may not be appropriate in all cases when the surviving spouse or civil partner dies, for example, where their estate after their personal 100% relief allowance was applied was less than the IHT threshold. However, if the survivor had remarried, the lack of a claim on their death may reduce the amount of unused 100% relief allowance available for transfer when their second spouse or civil partner dies.   

This is catered for by IHTA84/S124F(2), which allows the personal representatives making a claim on the last death to include a claim on an earlier death, provided it will not affect the tax payable on that death.   

Example  

Ron died in July 2028. He had been predeceased by Jan who died in January 2027. She in turn had been predeceased by her first husband, Steve, in 1997.  

As Steve died before 6 April 2026,his 100% relief allowance was unused. On Jan’s death she left her whole estate, valued at £525,000, on discretionary trusts for the children of her first marriage. This included a business valued at £200,000. As the estate was below the nil rate band after relief was applied there was no need to make a claim to transfer the unused 100% relief allowance from Steve’s estate.   

On Ron’s death in July 2028, the amount of unused 100% relief allowance available to transfer from Jan’s death is calculated as follows:  

Unused relief allowance £2.5m - £200,000 = £2.3m   

Percentage unused relief allowance = £2.3 million÷ £2.5 million = 92%  

92% x £2.5m = £2.3 million transferable relief allowance.   

However, if Jan’s personal representatives had made a claim to transfer the unused 100% relief allowance from Steve’s estate to Jan’s estate this would have fully covered the business property relief claim made in Jan’s estate. Ron’s personal representatives are able to make a claim to transfer Steve’s unused 100% relief allowance to Jan’s estate, which will then leave 100% of Jan’s 100% relief allowance available to transfer to Ron’s estate.