When couples talk to me about estate planning and Inheritance Tax, I always recommend they start by quantifying the potential liability insofar as how much of the estate would be liable, and when that arises ...
HMRC has published guidance on transferring nil-rate band to surviving spouses and civil partners!
For most couples, the majority of the liability arises on the death of the second spouse. So, at that point, how much of the estate will be taxed at the nil rate? The good news is that any nil-rate band not used by the first to die can be transferred to the survivor.
"This is possible for the residence nil-rate band too!"
HMRC has published guidance on transferring nil-rate band to surviving spouses and civil partners. The current nil-rate band threshold is £325,000. This is effectively a tax-free allowance and on transfer, the amount available can be as much as £650,000 if none of the original £325,000 was used on the death of the first spouse or civil partner.
It is only possible to transfer the unused nil-rate band if the couple were married or in a civil partnership when the first death occurred or if the request is sent to HMRC within 2-years of the death of the surviving spouse or civil partner. Percentages of unused nil-rate band available for transfer must be calculated based on the time of the first spouse or civil partner's death.
"How do you claim?"
The way to make a claim is dependent on the type of estate, when the person died or whether less than the full threshold is transferred. For deaths on or before the 31st of December 2021, claims must be made using form IHT217. If you want to transfer less than the full unused threshold, a full return must be made using IHT400 and IHT402.
For deaths after the December 2021 cut off date, unused amounts can be transferred though it is necessary to claim when probate is applied for. If the person was to die in Scotland, use form C1.
Until next time ...
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Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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