IHT – the transferable nil rate bands


For inheritance tax (IHT) purposes, there are now two nil rate bands – the basic nil rate band and the residence nil rate band (RNRB).

Nil rate band

The basic nil rate band is currently £325,000 and is frozen at that level until the end of 2020/21. This is the amount of an estate which can be left free of inheritance tax. To the extent that the estate exceeds the available nil rate band on death (excluding anything covered by the RNRB), inheritance tax is payable at a rate of 40%.

Each spouse and civil partner have their own nil rate band.

Residence nil rate band (RNRB)

The residence nil rate band is available for deaths occurring on or after 6 April 2017. For 2017/18 it is set at £100,000, but is set to increase by £25,000 a year in 2018/19, 2019/20 and 2020/21; so that in 2020/21 it will be £175,000. It applies where a residence is left to direct descendants, such as children or grandchildren.

As with the basic nil rate band, each spouse or civil partner has their own RNRB.

Transferring the unused portion

The inter-spouse exemption allows spouses and civil partners to leave property to each other on death without any inheritance tax being payable. So, if the first partner to die leaves all his or her estate to their spouse or civil partner, no inheritance tax would be due as the transfer would fall within the inter-spouse exemption. Consequently, in this scenario, the nil rate band and RNRB would not be used on the first death.

To ensure that overall a married couple or civil partners get the benefit of two nil rate bands and two RNRBs to set against the combined estate, any proportion of the nil rate bands unused on the first death can be claimed on the second death.

It should be noted that it is the unused percentage rather than the absolute amount that can be claimed on the second death – in this way, benefit is given for any increase in the nil rate band between the first and second deaths. On the death of the surviving spouse or civil partner, the unused portion of their spouse’s/civil partner’s RNRB can still be claimed, even where the first death was before 6 April 2017, as long as the second death is on or after that date.


Maurice died in 2015, leaving £50,000 to his son, Mark, and the remainder of his estate (which included his share of the family home) to his wife Maud.

On his death, he had used £50,000 (15.4%) of his nil rate band, leaving £275,000 (84.6%) of his nil rate band unused.

Maud dies in August 2017. She leaves the family home worth £500,000 to her son Mark, together with the balance of her estate, valued at £267,000. Her total estate is valued at £767,000.

She has her own nil rate band of £325,000, plus she can claim the 84% of the current value of the nil rate not used on her husband’s death – a total of £600,000.

As she has left a residence to a direct descendant, she can claim the RNRB of £100,000, plus 100% of that attributable to Maurice. It does not matter that he died before 6 April 2017 as she died after that date. She, therefore, has a RNRB of £200,000 to set against the family home of £500,000. The remainder of the family home (£300,000) and the balance of her estate (£267,000), totalling £500,00 is covered by the available nil rate band of £600,000. Thus no inheritance tax is payable on her death.

The transferable nil rate band must be claimed.