|
|
|
Since 9 October 2007 individuals have been able to set any unused nil
rate band on their spouse’s death against their own estate in addition to
their personal nil rate band. The nil rate band is the amount of the estate
on which there is no Inheritance Tax to pay.
An estate is not subject to inheritance tax if it is within the nil rate
band (currently £300,000). Transfers between spouses are generally free of
inheritance tax. If an individual leaves all their estate to their surviving
spouse then the nil rate band is effectively wasted. Many married couples
have in the past drawn up relatively complex wills to ensure that the nil
rate is used on the first death.
The new rules allow a surviving spouse or civil partner to use any nil rate
band that their spouse, or civil partner, did not use against their
inheritance tax estate, in addition to their own nil rate band.
The new rules apply to deaths after 9 October 2007. They are also
retrospective, meaning that the unused nil rate bands arising on deaths
before 9 October 2007 can be added to the nil rate bands of surviving
spouses, or civil partners, that die after that date.
For example:
Mr Jones died in May 2007 having made no chargeable transfers. He left his
entire estate to Mrs Jones. Mrs Jones dies in March 2008 and can set
£600,000 of nil rate bands against her inheritance tax estate.
Our view
This is a very welcome change which will give a significant relief to
married couples and those in civil partnerships allowing them to
simplify the way they distribute their estates on the first death. It is
however another instance of society’s longstanding bias against single
individuals. |
|
|
