Inheritance tax

The nil rate band – currently £300,000 per individual – will become transferable. The estate of a surviving spouse or civil partner will be able to benefit from any unused inheritance tax nil rate band of their deceased spouse or partner. This will apply on the death of a surviving spouse or partner after 8 October 2007, regardless of when the first death occurred.

The amount of the nil rate band available for transfer will be based on the proportion of the nil rate band that was unused when the first spouse or partner died. The unused proportion will be applied to the amount of the nil rate band in force at the date of the surviving spouse or partner’s death.

For example, Mr A dies today leaving his children £100,000 (ie one-third of the current nil rate band) with the rest of his estate passing to his wife. On Mrs A’s subsequent death, her nil rate band will then be increased by two-thirds. So, if the nil rate band at the time of Mrs A’s death is £360,000, she will be able to leave £600,000 free of inheritance tax, ie £360,000 plus £240,000 (two-thirds of £360,000).

If a person marries more than once, the nil rate band of the survivor can only be increased by a maximum of 100%.