The Transferable Nil Rate Band

The transferable nil rate band (NRB) solved a problem. We say phone instead of smartphone, similarly, except in the rare instance it’s not specifically so, the transferability of the NRB is implied. Hence, we hardly hear of the TNRB. The NRB is like a patch that mends a performance or security vulnerability in piece of software. Inheritance tax, or its previous incarnations – capital transfer tax and death duty was designed only to affect the richest in the land.

Inheritance tax was never meant to be a bother for the likes of you and me. Now it clobbers the man on the Clapham omnibus. It affects the likes of school teachers, hospital matrons and police sergeants.   

Loss of the NRB

Everyone could give away the value of the NRB, currently £325,000 before inheritance tax was due on their estate. Married couples tend to buy houses together. When the first party to a marriage died, most of the time, the deceased’s estate including their share of the marital home [by the terms of the will, the quirks of joint tenancy, or sometimes mercifully, the rules of intestacy] passed to the survivor of the marriage. The problem: the survivor could on his or her death pass only on a single NRB. In today’s terms, a married couple could only pass on £325,000.

Since October 2007, the nil rate band has been transferable. This means on the death of one party of a marriage or civil partnership, the survivor had transferred to them, the unused portion of the deceased’s NRB. A married couple could thus pass on £650,000 worth of assets. Inheritance tax became payable on the portion of their assets that exceeded £650,000.

There is a simplicity to the NRB – it’s easily understood, it does not discriminate among recipients or asset classes. One could have done the arithmetic on the back of a packet of matches.

The NRB is straightforward, unlike it’s bastard cousin the Residential Nil Rate Band which merely messes things up like the tangle of fairy lights from the Christmas tree of years past.  We must meet the time as it seeks us. The RNRB, notwithstanding its ugliness and ill conception could save your family as much as  £350,000. Contact me to arrange a no obligation consultation at which I’ll help you make sense of your inheritance tax allowances.

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