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Where Taxpayers and Advisers Meet

How is IHT and transfer of Nil Rate Band calculated when Spouse inherits only part of the Estate?

JetPil0t
Posts:9
Joined:Sat Jul 11, 2015 12:19 pm
Location:England
How is IHT and transfer of Nil Rate Band calculated when Spouse inherits only part of the Estate?

Postby JetPil0t » Sat Nov 17, 2018 3:02 pm

Hi there, I'm sure this question has been asked before but despite using the Advanced Search, I was unable to find a similar topic, so please bear with me if that is the case.

It's hopefully a fairly straightforward question. If the deceased (who has a single unused Nil Rate Band of £325k) has a will giving 4/6 of the Estate to his spouse and 1/6 to each of his 2 children (making 2/6 total):
1. How is IHT calculated?
I have had people give me different answers. Needless to say, couldn't find any help at HMRC call centre. If anyone has a number for a department that actually knows the answer to this question and can point me at an IHT manual reference, that would be most useful, feel free to PM!
For simple maths, let's say the estate is worth £600k and there is only cash involved (this is pretty close to the actual facts of the case).
- Estate value is £600k
- So £400k to go to the Spouse
- £100k to each of the children (£200k total)

Does the IHT get calculated on the £200k LESS the Nil Rate Band so NO IHT to pay, OR
Does the Nil Rate Band get deducted first, leaving taxable estate of £275k and then the IHT is calculated somehow pro-rata for the shares of the children only?

2. Is any of the deceased's Nil Rate Band left over to transfer to the Spouse, or is it all used as part of however the IHT is calculated?

If any further information needed to answer the question, please ask, thank you!

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: How is IHT and transfer of Nil Rate Band calculated when Spouse inherits only part of the Estate?

Postby pawncob » Mon Nov 19, 2018 11:27 am

The amount to the spouse is ignored for IHT purposes.

No IHT due.
With a pinch of salt take what I say, but don't exceed your RDA

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: How is IHT and transfer of Nil Rate Band calculated when Spouse inherits only part of the Estate?

Postby AGoodman » Mon Nov 19, 2018 11:36 am

2. The deceased has used 200/325 = 61.5% of his NRB so the widow will be able to use a further 38.5% of the NRB (whatever it may be) at the time of her death.

If there is a home in the estate that passed in part to the children, then the RNRB may be used first, allowing a greater part of the NRB to be inherited by the widow.

JetPil0t
Posts:9
Joined:Sat Jul 11, 2015 12:19 pm
Location:England

Re: How is IHT and transfer of Nil Rate Band calculated when Spouse inherits only part of the Estate?

Postby JetPil0t » Mon Nov 19, 2018 11:40 am

Thanks for taking the time to reply.

Anybody have a reference which confirms this is how the calculation is done?

There is no home is the estate so RNRB does not apply in this case.

gdcuk
Posts:3
Joined:Wed Aug 06, 2008 3:54 pm

Re: How is IHT and transfer of Nil Rate Band calculated when Spouse inherits only part of the Estate?

Postby gdcuk » Mon Nov 19, 2018 11:54 pm

A good place to look is the IHT402 form that would be used on the second death.

The steps of the calculation and guidance notes are included

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/497793/IHT402.pdf


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