Website of the UK government

Deaths during the tax year 2006-2007

Inheritance Tax (IHT) is only paid if the taxable value of your estate when you die is over £312,000 (2008-2009 tax year). The first £312,000 of a person’s estate is known as the IHT nil rate band because the rate of Inheritance Tax charged on this amount is currently set at  0%, so is free of tax. 

Where assets are transferred between spouses or civil partners, they are exempt from Inheritance Tax. This can mean that if, on the death of the first spouse or civil partner, they leave all their assets to the survivor, the benefit of the nil rate band to pass on assets to other members of the family, normally the children, tax free is not used.

• Inheritance Tax exemptions
• More about civil partnerships Opens new window

Proposed changes to unused Inheritance Tax nil rate band

In his Pre-Budget report the Chancellor of the Exchequer announced that where one party to a marriage or civil partnership dies and does not use their nil rate band to make tax free bequests to other members of the family, the unused amount can be transferred and used by the survivor’s estate on their death. 

This only applies where the survivor died on or after 9 October 2007.

In effect, spouses and civil partners between them now have a nil rate band that is worth up to double the amount of the nil rate band that applies on the survivor’s death.

For example, if on the death of the first spouse, they leave legacies of £40,000 to each of three children, the sum of £120,000 would be chargeable to IHT. Because this is below £312,000, the legacies pass free of tax and £180,000 (or 60%) of the nil rate band is unused. This unused amount can be transferred to the estate of the survivor. If the nil rate band when the survivor dies is £325,000 the Inheritance Tax nil rate band for the surviving spouse would be increased by 60% to £520,000

Although these proposals are not yet law, HM Revenue & Customs (HMRC) is allowing people to make a claim to transfer the unused nil rate now on deaths on or after 9 October and work out the tax that is  payable using the increased nil band rather than insist that they apply the current law (with a single nil rate band) and pay tax which HMRC would have to refund once the proposals are law.

Further information

Read HMRC's Customer Guide to Inheritance Tax.

The Probate and Inheritance Tax helpline: 0845 3020 900 (open from 9.00 am to 5.00 pm Monday to Friday).

More useful links

• HMRC guide to Inheritance Tax Opens new window
• More about probate on the Court Service website Opens new window
• Frequently asked questions on transfer of nil rate band Opens new window
• Guidance on transfer of nil rate band Opens new window
• Claim to transfer unused Inheritance Tax nil rate band Opens new window
• Help with PDF files