Transferable nil-rate band meaning

This Practice Note outlines the principles governing the calculation and use of the basic nil rate band (NRB) and the transferable NRB on death, and flags key practical points on the operation of those calculations. For broader guidance on the NRB, the transferable NRB and the residence NRB (RNRB) (also called the additional threshold), including how to claim these reliefs and the relevant time limits, see Practice Notes: IHT—nil rate band (NRB) and transferable NRB and IHT—residence nil rate band. Nil rate band The NRB removes a significant slice of a deceased person’s estate from inheritance tax (IHT), and in many cases eliminates any IHT liability altogether. The current NRB threshold is £325,000, which produces an IHT saving of £130,000. In the RNRB context, which applies to deaths on or after 6 April 2017, the NRB is sometimes described as the basic NRB. For historic threshold figures, see: HMRC: IHT thresholds and interest rates. In certain cases, the free estate on death may not secure the whole of...

A codicil can be used to amend a Will: alter executors or modify gifts, by adding or removing. As a rule, major revisions are best done through a new Will; codicils suit minor tweaks, like replacing executors or adding a bequest. Yet, even slight adjustments via codicil risk creating uncertainty, so drafting demands caution. In particular, ‘as if’ revocation-style clauses are hazardous; as Megarry J observed in Re Lawrence’s Will Trusts, such wording is a dangerous tool because few draftsmen can anticipate every outcome of rigorously applying the hypothetical scenario it creates. Given that the words ‘as if’ often appear in codicils, proceed with care and consider preparing a fresh Will. Amending one provision can mean other provisions also require revision, so the original Will should be reviewed in the light of any...

Nil rate band (NRB) and transferable nil rate band (TNRB) Each individual’s estate is assessed for inheritance tax (IHT), but a portion is charged at zero per cent, known as the nil rate band (NRB). For the 2023–24 tax year this stands at £325,000. The government stated in the Autumn Statement 2022 that this figure will be held at the same level until 5 April 2028. See: Autumn Statement 2022—Private Client analysis—Key Private Client announcements. Before 9 October 2007, where the chargeable transfer on death did not fully use the deceased’s available NRB—either because the estate was below the threshold or assets passed to an exempt beneficiary—the associated tax saving was not completely realised. A common illustration is spouses leaving their whole estates to each other under a Will; and, in the absence of a Will, a substantial share, if not the entire estate, often passes to the surviving spouse under the intestacy rules. As transfers between spouses are exempt from IHT, such gifts are not chargeable transfers...

1 Legacy of nil rate band on discretionary trust 1.1 [ If my Spouse survives me ] I direct my Trustees, free of inheritance tax and foreign death duties, to receive the greatest sum of money (if any) that may, in the circumstances prevailing at my death, be provided under this clause without any liability arising for the payment of inheritance tax on, or by reason of, my death (the Nil Rate Band Legacy). For the avoidance of doubt, and without limiting the generality of the foregoing, the circumstances to be considered shall include: any chargeable transfers made by me during my lifetime (or events treated as such for inheritance tax purposes); the dispositions taking effect under this Will (other than this clause 1) or any codicil to it; and any property regarded as forming part of my estate immediately before my death for inheritance tax purposes...

Where a surviving spouse holds an immediate post-death interest (IPDI) in a qualifying residential interest (see section 8H, Inheritance Tax Act 1984), their residence nil rate band (RNRB) can be increased by the transferable residence nil rate band (TRNRB) of the predeceasing spouse, provided a claim is made in such circumstances as appropriate...