Transferring unused basic threshold for Inheritance Tax
Find out the rules for transferring the basic tax-free allowance (nil rate band) to a surviving spouse or civil partner.
Everyone has the same basic tax-free allowance before they must pay Inheritance Tax. The current threshold is £325,000. If the threshold has not been fully used when the first person in a marriage or civil partnership dies, you can transfer it. The unused part can go to the surviving spouse or civil partner.
Rules for transferring unused basic threshold
The basic tax-free allowance available when a spouse or civil partner dies can be as much as £650,000 if none of their £325,000 threshold was used when the first partner of the couple died.
The percentage of the threshold that was not used when the first partner died increases the basic threshold that’s available for the surviving partner’s estate.
You can only transfer threshold if:
-
the couple were married or in a civil partnership when the first death occurred
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you send the request to HMRC within 2 years of the death of the surviving spouse or civil partner
Work out the percentage of unused basic threshold available and apply it
To work out the percentage of unused threshold available to transfer, you must use the threshold in use at the time the first spouse or civil partner died.
Example 1
Carole dies leaving an estate worth £600,000. She leaves £130,000 to her children and the rest to her husband Simon. The threshold in use at the time was £325,000.
The £130,000 left to the children would use up 40% (£130,000 ÷ £325,000 x 100) of the threshold, leaving 60% unused.
When Simon dies, the threshold is still £325,000. His available threshold would increase by the unused percentage (60%) to £520,000 (£325,000 x 60% +£325,000).
If Simon’s estate is not worth more than £520,000 there’ll be no Inheritance Tax to pay when he dies. Inheritance Tax would be payable on anything above £520,000.
Example 2
David dies leaving an estate worth £800,000. He leaves £50,000 to his friend Sandra, and the rest to his civil partner, Mark. The threshold in use at the time was £250,000.
The £50,000 left to Sandra would use up 20% (£50,000 ÷ £250,000 x 100) of the threshold, leaving 80% unused.
When Mark dies, the threshold is £325,000. Mark’s available threshold would increase by the unused percentage (80%) to £585,000 (£325,000 x 80% + £325,000).
If Mark’s estate is not worth more than £585,000 there’ll be no Inheritance Tax to pay when he dies. Inheritance Tax would be payable on anything above £585,000.
Make a claim to transfer unused basic threshold
The way you make a claim depends on:
- the type of estate you’re dealing with
- the date the person died
- whether you transfer less than the full threshold
Where full details are not needed — excepted estates
If it’s an excepted estate check which process you need to follow.
For deaths on or before 31 December 2021 you can only make a claim to transfer the full unused threshold with form IHT217.
If you’re transferring less than the full unused threshold, you’ll no longer qualify as an excepted estate. You must make a full return of estate with form IHT400 and form IHT402.
For deaths on or after 1 January 2022 you:
- can transfer any unused amount
- should claim when you apply for probate
If the person who died lived in Scotland use form C1.
If you’re making a full return of estate with form IHT400
If you must make a full return of the estate you’ll need to transfer the unused threshold with form IHT400 and form IHT402.
Check when you must send full details of the estate.