What happens to the inheritance tax allowance of couples when one spouse dies? Is it cut in half?

What happens to the inheritance tax allowance of couples when one spouse dies? Is it cut in half?

I read in USNewsRank that the amount that couples can pass on tax free is double that of individuals. But what if one spouse has died? Would their children still be able to claim this when the second parent dies?

Patrick Connolly
Fri, 01/03/2020 – 14:06


Inheritance tax can be payable if the value of somebody’s estate, on their death, is more than £325,000. This is because individuals will typically benefit from a nil-rate band amount of £325,000, which means that the value of their estate up to this amount is exempt from tax.

UK-domiciled married couples and registered civil partners are allowed to pass assets to each other during their lifetime or when they die without having to pay inheritance tax, no matter how much they pass on. This is known as spouse or civil partner exemption.

In addition, the survivor of a marriage or civil partnership can claim the proportion of their partner’s nil-rate band which wasn’t used on their death in addition to their own entitlement. This means that if the deceased partner did not use any of their nil-rate band, perhaps because they left everything to the surviving partner, then the surviving spouse can benefit from a nil-rate band allowance of up to £650,000. So the answer to your question is yes.

The transferable allowance benefit also applies to the residence nil-rate band, which was introduced in phases from April 2017. This allowance is available for individuals who pass on a residence to direct descendants such as children or grandchildren, but also stepchildren, adopted and foster children. The residence nil-rate ban allowance is currently £150,000 a person, although it will rise to £175,000 per person from April 2020. These amounts are capped subject to the value of the property.

If unused by the first partner, the allowance can be transferred to their spouse or civil partner on death, meaning a couple could have a combined nil-rate band allowance of £1 million from April 2020. 

Patrick Connolly, certified financial planner at Chase de Vere

Do you have a money question for our panel of experts?

At USNewsRank, we have a panel of top experts to help with your money and investing questions. If you have a tax issue that’s keeping you awake at night, a question about investing that you’ve always wondered but been too shy to ask, or even need a full money makeover for free, we’d love to hear from you.

If you have been treated unfairly by a firm send the details to USNewsRank’s Fight for your Rights and we could take up the fight for you.

Email fightback@usnewsrank.com

If you have a question about your investments or investing in general, put it to our Investment Doctor.

Email editor@usnewsrank.com

If you have a question about your personal finances – anything from tax to state pensions, inheritance tax, property sales and more – write to our Ask the experts panel.

Email advice@usnewsrank.com

Would you like a full money makeover? We will arrange a free one-to-one meeting for you with an FCA-regulated independent financial adviser worth over £2,000.

See usnewsrank.com/money-makeover for more details.

OneSite Article
Syndicate to OneSite
Queued for syndication