How to Transfer Unused Nil-Rate Band Between Spouses

When one spouse or civil partner dies without using their full Inheritance Tax allowance, the unused portion doesn't have to go to waste. The surviving partner can add this unused allowance to their own, potentially doubling the tax-free amount available when they die. This guide explains how...

What is the nil-rate band?

The nil-rate band is the amount you can leave when you die before Inheritance Tax becomes payable. For the 2025/26 tax year, this threshold stands at £325,000. Anything you leave above this amount to someone other than your spouse or civil partner may be subject to Inheritance Tax.

When you leave assets to your husband, wife or civil partner, these transfers are normally exempt from Inheritance Tax. This means if the first person to die leaves everything (or most things) to their surviving partner, they won't use up much—or any—of their £325,000 allowance.

How transferring unused allowance works

When the surviving spouse or civil partner eventually dies, their estate can benefit from any unused nil-rate band from the first death. This means the tax-free threshold can increase to as much as £650,000 if none of the first partner's £325,000 allowance was used.

The transfer works as a percentage, not a fixed amount. You calculate what percentage of the nil-rate band remained unused when the first partner died, then apply that percentage to increase the threshold available on the second death.

Calculating the unused percentage

To work out how much allowance can be transferred, you must use the nil-rate band that was in effect when the first spouse or civil partner died, not the current threshold.

Here's how the calculation works:

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 at the time of her death was £325,000.

The £130,000 left to the children uses up 40% of the threshold (£130,000 ÷ £325,000 × 100), leaving 60% unused.

When Simon dies, the threshold is still £325,000. His available threshold increases by the unused 60% to £520,000 (£325,000 × 60% + £325,000).

If Simon's estate is worth £520,000 or less, there will be no Inheritance Tax to pay. Tax would only apply to amounts 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 at the time was £250,000.

The £50,000 left to Sandra uses up 20% of the threshold (£50,000 ÷ £250,000 × 100), leaving 80% unused.

When Mark dies, the threshold is £325,000. Mark's available threshold increases by the unused 80% to £585,000 (£325,000 × 80% + £325,000).

If Mark's estate is worth £585,000 or less, there will be no Inheritance Tax to pay.

Eligibility requirements

You can only transfer unused nil-rate band if:

The couple were married or in a civil partnership when the first death occurred
You send the request to HMRC within 2 years of the death of the surviving spouse or civil partner

How to make a claim

The process for claiming transferred nil-rate band depends on the type of estate, the date of death, and whether you're transferring the full unused amount.

For excepted estates

An excepted estate is one that meets certain conditions and doesn't require full details to be sent to HMRC. If you're dealing with an excepted estate, the process differs depending on when the death occurred.

For deaths on or before 31 December 2021:

You can only claim to transfer the full unused threshold using form IHT217. If you need to transfer less than the full unused threshold, the estate no longer qualifies as excepted and you must make a full return using form IHT400 and form IHT402.

For deaths on or after 1 January 2022:

You can transfer any unused amount and should make the claim when you apply for probate. If the person who died lived in Scotland, use form C1.

For estates requiring a full return

If you must make a full return of the estate using form IHT400, you'll need to transfer the unused threshold using both form IHT400 and form IHT402. You should check whether full details of the estate are required based on its value and composition.

Key points to remember

The transferred allowance is based on a percentage, which means it automatically adjusts if the nil-rate band has increased between the first and second deaths. This ensures the surviving partner benefits from any increases in the threshold over time.

Remember that the 2-year deadline for making a claim to HMRC is strict. If you're administering an estate where the surviving spouse or civil partner has already died, make sure you submit the claim within this timeframe.

The ability to transfer unused nil-rate band can make a significant difference to the Inheritance Tax bill on the second death, potentially saving thousands of pounds for the beneficiaries of the estate.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.