Chapter IHTM46044

CourtHM Revenue & Customs
Record NumberIHTM46044
Published date20 March 2016

Where an estate exceeds the taper threshold (IHTM46023), the default allowance (IHTM46024) is reduced and instead the estate has an adjusted allowance (IHTM46025). Examples of how the default and adjusted allowance are calculated are set out at IHTM46026.

Tapering of a person’s default allowance can reduce either, or both, of:

  • The amount of the unused residence nil rate band (RNRB) that is available to transfer to the estate of a surviving spouse or civil partner,
  • The total amount of RNRB that is available on the survivor’s death.

Example 1 – partial tapering in the first estate

Maria’s civil partner, Monique, died in March 2010 with an estate valued at £2,050,000. Half of Monique’s estate was left to Maria and half to Monique’s sister.

In accordance with IHTA84/S8G(4)(a) Monique’s estate is treated as having unused RNRB (or carry-forward amount) of £100,000. However, because Monique’s estate was greater than the taper threshold, IHTA84/S8G(5) reduces this carry-forward amount.

As Monique’s estate exceeds the taper threshold by £50,000, the carry-forward amount of £100,000 is reduced by £1 for every £2 that her estate exceeds the taper threshold. Monique’s carry-forward amount of £100,000 is therefore reduced by £25,000 to £75,000.

Maria dies in September 2019 when the residential enhancement (IHTM46022) is £150,000. Maria leaves an estate valued at £1,450,000 which includes her house worth £375,000. Maria leaves the whole of her estate to her son.

Maria’s estate is entitled to a residential enhancement of £150,000. In addition Maria’s estate is entitled to claim a brought forward allowance from Monique’s estate.

The brought-forward allowance from Monique’s estate is calculated, in accordance with IHTM46041, as 75% (£75,000 ÷ £100,000) of the residential enhancement that is in force at Maria’s date of death (£150,000). The brought-forward amount is therefore £112,500 (75% × £150,000).

Maria’s estate has a default allowance of £262,500 (£150,000 + £112,500).

As Maria’s estate is below the taper threshold the default allowance is not reduced.

Maria leaves her house worth £375,000 to her son. Maria’s estate is entitled to RNRB equal to the lower of £262,500 (her default allowance) or the value of the residence that is left to her son (£375,000). Maria’s estate therefore qualifies for RNRB of £262,500.

Example 2 – complete tapering in the first estate

John died in 2001 leaving an estate of £5.5 million, including £5m of shares in the family company...

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