Tax & Accounting News

Helping hand on nil rate bands

03/04/2009

For Estates Inheritance tax (IHT) is only payable when the taxable value of an estate is above a certain threshold. In the 2009-2010 tax year, this threshold, or nil rate band, will stand at £325,000, rising from £312,000 in 2008-09.

When assets are transferred between spouses or civil partners, they are exempt from IHT. This means that when the first spouse or civil partner dies and leaves all their assets to the survivor, the survivor benefits from any unused part of the deceased nil rate band.  This means that the survivor can potentially pass on assets valued in excess of nil rate band when they die.  

This benefit also applies where the first spouse died before October 2007, when the IHT rules were changed to introduce this arrangement.

When the survivor dies, their executors must claim any unused part of their nil rate band from the first spouse or civil partner.

The claim for the balance of the first nil rate band is made on form IHT216 and must be submitted to HM Revenue & Customs (HMRC) within 24 months of the end of the month in which the survivor died.

HMRC also expects executors to provide documentary evidence that some or all of the unused nil rate ban can be transferred. This includes the couple’s marriage or civil partnership certificate, death certificate and grant of probate of the first spouse. These can be originals or certified copies.

HMRC has reported that up to 80 per cent of estates fail to provide the necessary evidence. It will not process claims until it receives the necessary documents and because the Probate Office requires HMRC’s approval to grant probate, this can also be delayed.

Anyone who has been widowed or lost their civil partner would be wise to establish now whether there was any unused nil rate band to transfer. A sensible step is to complete an IHT216 form now and keep it with your Will and the relevant documents that HMRC requires as evidence, as well as making copies for your executor.

For more information, please contact us.

 

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