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IHTM43034 - Calculating the transferable nil rate band: chargeable lifetime transfers by the second spouse or civil partner

Any available transferable nil rate band (TNRB) from the estate of the first spouse or civil partner to die can only be used against the Inheritance Tax (IHT) arising on the death of the surviving spouse or civil partner. No TNRB will be available against any IHT due on a lifetime transfer that is chargeable when made and above the nil rate band.  

However, any TNRB available will reduce any additional tax due on a lifetime transfer that arises as a result of the death, as the nil rate band on the second death will be increased. 


Jim died in June 2002. His estate, valued at £950,000 was left as follows

  • Farm valued at £300,000 and qualifying for 100% agricultural relief to his son,
  • £10,000 to RSPCA
  • £50,000 to grandchildren
  • Residue to his wife Ruth.

Unused nil rate band calculation

M = £250,000

VT = £50,000

M* *is greater than VT by £200,000

Transferable nil rate band calculation

E =£200,000

NRBMD = £250,000 so

(200,000 ÷ 250,000) × 100 = 80.0000%

Ruth makes a gift of £500,000 into a discretionary trust in July 2005 when the nil rate band was £275,000. This is an immediately chargeable transfer and the trustees pay tax at 20% on £225,000, which is £45,000. 

Ruth remarries in September 2005 and then dies in February 2008, leaving an estate of £150,000 as follows

  • £25,000 to her grandchildren
  • Residue to her second husband, Robert.

The consequences on Ruth’s death are

  • The nil rate band applicable on her death is £300,000 + (£300,000 x 80%)  = £540,000
  • The lifetime chargeable transfer uses up the nil rate band first. As the increased nil rate band is greater than the chargeable transfer, there is no additional tax payable as a result of the death, but the tax paid by the trustees when the trust set up is not repayable.
  • The nil rate band available against the death estate is £40,000. The chargeable death estate is £25,000, so that leaves £15,000 unused and available to transfer to her second spouse’s estate
  • The amount of nil rate band available for transfer on Robert’s death will be
  • 15,000 ÷ 300,000 × 100% = 5%

The amount transferable is calculated by reference to the single nil rate band available on the deceased’s death and not the uprated amount.