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Making the most of IHT nil-rate band

1 Dec 08

In last year’s Pre-Budget Report, the Chancellor announced that with effect from 9 October 2007, it is possible for spouses and civil partners to transfer unused inheritance tax (IHT) nil-rate band allowances

A transferable nil-rate band arises when one party to a marriage or civil partnership dies and the amount of their estate that is chargeable to IHT does not use up all of the nil rate band they are entitled to. The unused part can now be transferred to the survivor when they die. The first death can occur before 9 October 2007: the surviving spouse's death must be after that.

The nil rate band for 2008/09 is £312,000. It is key that clients understand how to ascertain how much of a nil-rate band allowance is unused and how to secure it. The most common reason for it being unused is that transfers between spouses are exempt.

Advisors need to find the unused proportion of the nil-rate band for the first death and uprate the survivor’s nil rate band, by that proportion.

When the survivor dies, their personal representatives will make a claim. A claim form should be completed that will help work out how much of the nil rate band is available for transfer. The claim must be made within 24 months of the end of the month in which the survivor dies.

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