IHTM43022 - Calculating the transferable nil rate band: how the amount to be transferred is calculated where the first estate is less than the IHT nil rate band on the first death

The process for calculating the amount of unused nil rate band where the estate on the first death is less than the nil rate band available at that time is no different from the normal calculation (IHTM43020).听

Example

Robert died on 16 August 2005 leaving an estate worth 拢250,000. He left legacies of 拢110,000 to his children and the residue (拢140,000) to his wife Sarah.

Unused nil rate band calculation

M = 拢275,000

VT = 拢110,000

M* *is greater than VT by 拢165,000

Transferable nil rate band calculation

E =拢165,000

NRBMD = 拢275,000 so

(165,000 梅 275,000) 脳 100 = 60.0000%

On Sarah鈥檚 death, the nil rate band available to her estate will be increased by 60%.

Although in this example VT has been shown as a chargeable legacy, the same position would apply if it had been assets held in trust which formed part of the deceased鈥檚 estate passing to a chargeable beneficiary, or a gift with reservation that is bought into charge upon death.