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How does the transfer work?

Everyone's estate is exempt from Inheritance Tax up to a certain threshold: £325,000 in 2012-13. This threshold is also known as the 'nil rate band'.

Married couples and registered civil partners are also allowed to pass assets to each other during their lifetime or when they die without having to pay Inheritance Tax. It doesn't matter how much they pass on - as long as the person receiving the assets has their permanent home in the UK. This is known as 'spouse or civil partner exemption'.

If someone leaves everything they own to their surviving spouse or civil partner in this way it's exempt from Inheritance Tax. It also means they haven't used any of their own Inheritance Tax threshold or nil rate band. This can be used to increase the Inheritance Tax threshold of the second spouse or civil partner when they die - even if the second spouse has remarried. Their estate can be worth up to £650,000 in 2012-13 before they owe Inheritance Tax.

To transfer the unused threshold, the executors or personal representatives of the second spouse or civil partner to die need to send certain forms and supporting documents to HM Revenue & Customs (HMRC). HMRC calls this 'transferring the nil rate band' from one partner to another.

When can the threshold be transferred?

The threshold can only be transferred on the second death, which must have occurred on or after 9 October 2023 when the rules changed. It doesn't matter when the first spouse or civil partner died. However, if it was before 1975 the full nil rate band may not be transferrable, as the amount of spouse exemption was limited then. There are some situations when the threshold can't be transferred but these are quite rare. See the section at the end of this guide.

How to make the claim

When the second spouse or civil partner dies, the executors or personal representatives of the estate should take the following steps.

Step 1: Work out what percentage of the threshold you can transfer

The size of the first estate doesn't matter. If it was all left to the surviving spouse or civil partner, 100 per cent of the threshold was unused. You can transfer the full percentage when the second spouse or civil partner dies, even if they die at the same time.

It isn't the unused amount of the first spouse or civil partner's nil rate band that determines what you can transfer but the unused percentage.

If the deceased made gifts to people in their lifetime that weren't exempt, the value of these gifts must first be deducted from the threshold. You can then work out the percentage available to transfer. You may also need to establish whether any of the assets that the first spouse left could have qualified for Business or Agricultural Property Relief.

Worked examples

To see examples of how the unused nil rate band can be transferred follow the link below.

• Transferring an unused Inheritance Tax threshold - worked examples

• Inheritance Tax thresholds over the years from HMRC Opens new window

Step 2: Assemble documents from the first death to support a claim

You will need all of the following documents from the first death:

• a copy of the first will, if there was one
• a copy of the grant of probate (or confirmation in Scotland), or the death certificate if no grant was taken out
• a copy of any 'deed of variation' if one was used to vary (or change) the will

If you need help finding these documents, get in touch with the relevant court service or general register office for the country you live in. (See links below under 'More useful links'). The court service may be able to provide copies of wills or grants; the general register offices may be able to provide copies of death certificates.

Step 3: Complete and send in the relevant forms

You must make the claim within 24 months from the end of the month in which the second spouse or civil partner dies.

The forms you'll need to fill in depends on the following:

• how much of the unused threshold is being transferred to the second spouse or civil partner
• the value of the estate when the second spouse or civil partner dies

100 per cent of the unused Inheritance Tax threshold to transfer and the value of the estate is less than twice the threshold

If 100 per cent of the unused threshold is being transferred and the value of the estate is less than twice the threshold when the second spouse or civil partner dies (£650,000 in 2012-13) the estate may be classed as an 'excepted estate'.

Follow the link below though to find out the other qualifying conditions for excepted estates.

If the estate does qualify as an excepted estate, you'll need to complete form IHT217 to claim the unused threshold. Return this together with form IHT205/C5 and the forms you need for probate (or confirmation in Scotland).

• What qualifies as an 'excepted estate' for Inheritance Tax?

100 per cent of the unused Inheritance Tax threshold to transfer and the value of the estate is more than twice the threshold

You’ll need to complete form IHT402 to claim the unused threshold. Return this together with form IHT400 and the forms you need for probate (or confirmation in Scotland) if both of the following apply:

• 100 per cent of the unused threshold is being transferred
• the value of the estate is more than twice the threshold when the second spouse or civil partner dies (£650,000 in 2012-13)

Less than 100 per cent of the unused Inheritance Tax threshold to transfer or the estate doesn’t qualify as an 'excepted estate'

You’ll need to complete form IHT402 to claim any unused threshold. Return this together with form IHT400 and the forms you need for probate (or confirmation in Scotland) if either of the following applies:

• there is less than 100 per cent of the threshold to transfer
• the estate doesn’t qualify as an 'excepted estate'

No unused Inheritance Tax threshold to transfer

If there is no unused threshold to transfer you'll only need to complete form IHT400 and the forms you need for probate (or confirmation in Scotland).

• What qualifies as an 'excepted estate' for Inheritance Tax?

• Find the right Inheritance Tax and probate forms

• Inheritance Tax and the probate process

Exceptions - when the rules are different

In the following two cases, the rules for transferring a threshold are different:

• if the estate of the first spouse or civil partner had qualified for relief on woodlands or heritage property
• if the surviving spouse or civil partner had an unsecured pension as the 'relevant dependant' of a person who died with an Alternatively Secured Pension

The rules are complicated and you might want to contact the Probate and Inheritance Tax Helpline for advice.

More useful links

• Copies of grants and wills in England and Wales - justice website Opens new window

• Probate - Northern Ireland Courts and Tribunal Service Opens new window

• Copy of will or confirmation - Scottish Courts Opens new window

• Certificate ordering service - General Register Office for England and Wales Opens new window

• Order a death certificate - General Register Office for Scotland Opens new window

• Guidance on death and bereavement - nidirect government services Opens new window

Useful contacts

• Probate and Inheritance Tax Helpline