Inheritance tax – nil band

The inheritance tax nil band is the threshold up to which an estate pays no inheritance tax (IHT). Currently, this stands at £325,000 per individual, regardless of domicile or residence.

Anything above this threshold is usually taxed at 40%, unless exemptions or reliefs apply. Planning around the inheritance tax nil band can significantly reduce an estate’s tax liability.

How Unused Nil Band Can Transfer to a Spouse

A lesser-known aspect of the inheritance tax nil band is that it can be transferred between spouses. If one spouse dies domiciled abroad with no UK assets and leaves their estate to their children, their nil band remains unused.

If the surviving spouse later dies in the UK, they can inherit the unused nil band from their late spouse’s estate. This can increase their IHT-free allowance, reducing the tax burden for beneficiaries.

Maximising Your Inheritance Tax Allowance

To make the most of the inheritance tax nil band, consider:

• Spousal exemptions – Assets left to a UK-domiciled spouse are tax-free and can pass on unused allowances.
• Residence nil band – If passing a main home to direct descendants, an extra £175,000 allowance may apply.
• Gifting strategies – Lifetime gifts may reduce the taxable estate if given at least seven years before death.

Proper estate planning ensures you take full advantage of these reliefs and exemptions.

How We Can Help

Understanding and making the most of available allowances can be complex. At Lewis Brownlee, we help families plan efficiently to reduce inheritance tax liabilities.

If you need expert estate planning advice, contact us today. Our team is here to assist you.