Calculating the transferable nil rate band: how the amount to be transferred is calculated where the first estate is less than the IHT nil rate band on the first death and with a lifetime transfer
The process for calculating the amount of unused nil rate band where the estate on the first death is less than the nil rate band available at that time and there are lifetime transfers is no different from the normal calculation (IHTM43021).
James died on 16 August 2005 leaving an estate worth £250,000 to his wife Anne. During his lifetime he had made gifts of £165,000 to his children.
Unused nil rate band calculation
The maximum amount that could have been transferred at nil percent is
£250,000-£165,000 = £110,000, so M is £110,000.
The chargeable value transferred on the death is Nil so, VT is £Nil.
M is greater than VT by £110,000
Transferable nil rate band calculation
NRBMD = £275,000 so
(110,000 ÷ 275,000) × 100 = 40.0000%
On Anne’s death, the nil rate band available to her estate will be increased by 40%.