Legal News | 1.04.21

For richer, for poorer, ‘til death us do part (and beyond)

Nil Rate Bands and spouses

In England and Wales, everybody is entitled to the inheritance tax Nil Rate Band (currently £325,000). Gifts up to this sum can be made in the 7 years before death or under the terms of your Will to non-exempt beneficiaries.

You may also be aware of ‘spouse exemption’ from inheritance tax, which means that anything you leave in your Will to a surviving spouse or civil partner will pass to them inheritance tax free.

If you leave your entire estate to your surviving spouse, it will of course be tax-free because of the spouse exemption. But what happens to the Nil Rate Band, we hear you ask? Does it disappear because you gave it all to your spouse?

Transferable Nil Rate Band

Happily, the answer to that is no. In the case of the first spouse to die, their Nil Rate Band in this example would be treated as unused. Following the death of the surviving spouse their estate can benefit not only from their Nil Rate Band but also from one carried forward from the first to die. This is called the ‘Transferable Nil Rate Band’, and it can be a very useful way of making sure as much of your estate as possible goes to your loved ones rather than the taxman.

If your spouse died before you and, for any reason, did not make use of their full Nil Rate Band when they died, your estate may well be able to save money in this way. This could be relevant however long ago that former spouse died.

In addition, your estate may be able to benefit from the Residence Nil Rate Band as well as a Transferable Residence Nil Rate Band from your deceased spouse or civil partner.

We recommend you seek legal advice to find out more, not only on the Nil Rate Band but also on other inheritance tax exemptions and reliefs
If you would like to discuss this further and see what we can do to help you reduce your inheritance tax bill, please get in touch with your usual Wansbroughs contact or email us at wealth@wansbroughs.com.