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TaxRobin, Tax Consultant
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Mrs R's first husband died in 1976, leaving everything to her.

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Mrs R's first husband died in 1976, leaving everything to her. She remarried in 1978, but, unfortunately, her second husband contracted cancer, and died in March 1979, leaving her with a lifetime interest in his house (i.e. she could live in it rent free for the rest of her life, with ownership reverting to his children on her death, remarriage, or vacating it). He also left half of his other assets to his children. Since these were worth more than the then nil-rate band of £25,000, there will be no nil rate band available to transfer to Mrs R on her death. The house is now worth about £325,000, and her other assets are now worth about £200,000.
My question is "can the unused nil rate of the first husband still be transferred to Mrs R?"
Hello and thank you for allowing me to assist you.
The threshold can only be transferred on the second death (hers), which must occurr on or after 9 October 2007 when the rules changed. It doesn't matter when the first spouse or civil partner died. However, if he had passed before 1975 the full nil rate band may not be transferrable as the amount of spouse exemption was limited then.
When she passes the unused amount from her first husband would be transferred.
You can see some examples of the nil being used on the HMRC page found at the following url:
Here the example that would most benefit you in your situation:
Example 4 - transferring thresholds from more than one spouse
Owen dies in April 2007, leaving an estate worth £250,000. He gave £150,000 of this to his son Gregor and the rest (£100,000) to his wife Maria. The threshold when Owen died was £300,000. The legacy to his son uses up 50% of Owen's nil rate band, leaving 50% unused and available to transfer. See the examples above for calculations.
Maria later marries Aldo, who dies in May 2008. He leaves 60% of his nil rate band unused.
Maria dies in June 2009, leaving an estate worth £700,000. The Inheritance Tax threshold when she died was £325,000.
Maria's personal representatives can transfer both Owen's and Aldo's unused thresholds to her to increase her own threshold. These total 110% (or £357,500) but the most they can transfer is 100% of the threshold when Maria died (£325,000).
So Maria's threshold is increased to £650,000, using 100% of her nil rate band and the unused parts of Owen's and Aldo's, limited to £325,000.
Maria's estate of £700,000 is £50,000 more than her increased threshold of £650,000, so there's Inheritance Tax to pay on £50,000.
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