Our May article discussed the Inheritance Tax (IHT) Nil Rate Band and the ability for Executors to claim the proportion of the Nil Rate Band that was unused by the deceased’s late spouse/civil partner.  This article gives guidance as to the practicalities of making a claim and some useful points to note.

Making a Claim: the Practicalities

Who makes a claim?

Usually, the Executors of the surviving spouse/civil partner’s estate make the claim, although in practice anyone who is liable for IHT as a result of the death can make a claim.

When should a claim be made?

A claim must usually be made within the 2 years following the end of the month in which the surviving spouse/civil partner died.

What paperwork is required?

Executors must complete form IHT402; for anyone else making a claim, form IHT216 is required.

The form asks for information regarding first spouse/civil partner to die, including;

  • Name
  • Date of death
  • Last known address
  • Date of marriage/civil partnership
  • Value of estate at time of death
  • Details of any gifts made
  • Availability of any exemptions or reliefs

Once completed, the form should be submitted to HMRC with the following supporting documentation, where available;

  • Copy of the Grant of Probate
  • Copy of the Will
  • Any Deed of Variation made following the deceased’s death

Points to Note

  • It is the proportion of the Nil Rate Band that was unused, rather than the amount, that can be transferred/claimed by the Executors of the deceased’s estate.
    • Example: Joe died in January, 2008 when the Nil Rate Band was £300,000.  The value of Joe’s estate at the time of his death was £500,000.  Of this amount, Joe left £75,000 to his daughter, Josephine and the remainder to his wife, Patricia.  The £425,000 that Joe passed to his wife was exempt from IHT and therefore did not use any of the Nil Rate Band.  However, the £75,000 that he left to Josephine was not exempt and used 25% of the Nil Rate Band of £300,000.  On Patricia’s subsequent demise in August, 2012, her Executors were able to claim a further 75% of the Nil Rate Band which at that time was £325,000.  Therefore, a further £243,750 (£325,000 x 75%) was available to offset against Patricia’s taxable estate.
  • The transferrable Nil Rate Band only applies to married couples and civil partners.  It does not apply to co-habiting couples or couples who have divorced.
  • Where the surviving spouse/civil partner was widowed more than once, the unused Nil Rate Bands of previous spouses/civil partners may also be utilised.  The maximum amount that may be transferred/claimed by the Executors is the equivalent of one additional Nil Rate Band (currently £325,000), giving an overall maximum Nil Rate Band of £650,000 (2013/14).
  • Where a person dies and their late spouse had themselves been widowed, the Nil Rate Band of the first spouse/civil partner to die and that of their previous spouse/civil partner may be claimed by the Executors of the deceased’s estate.  Once again, the maximum amount that may be transferred is the equivalent of one additional Nil Rate Band.

To discuss the impact of Inheritance Tax on your estate in more detail and the opportunities surrounding the transferrable Nil Rate Band, please contact one of our Chartered Financial Planners at Springfield Financial Services on 01772 729742.