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Transferring the NRB and RNRB


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The concept of a nil rate band has been around for many years, providing people with the ability to pass on part of their estate without incurring estate duty, capital transfer tax and, since 1986, inheritance tax (IHT). Almost ten years ago, in October 2007, the UK Government announced the ability to transfer any unused nil rate band between a married couple or civil partners on second death.

The ability to transfer means that where the nil rate band has not been used on first death, perhaps because the deceased left everything to their spouse and such transfers are exempt, on the second death the executors of the estate could claim the unused amount. The entitlement is expressed as a percentage of the unused nil rate band at the time of the first death and when transferred the amount claimed is the same percentage, but of the nil rate band at the time of the second death. The only requirement is that the second death must occur after the announcement, so after 9 October 2007.

The first death could have occurred many years before although prior to 21 March 1972 there was no spousal exemption. So even if the deceased left their estate to their spouse, it would still have used some, or all, of their nil rate band. A limited spousal exemption of £15,000 applied after this date and was made unlimited from 13 November 1974.

Let us consider an example of how transferring a nil rate band works.



  • Tom died in June 2007 and left his estate to his wife, Barbara. This transfer was covered by the spousal exemption and therefore Tom had not used any of his nil rate band, which at the time was £300,000.
  • Barbara subsequently died in July 2016 leaving an estate of £650,000 and at that time the nil rate band was £325,000, which covers half of Barbara’s estate.
  • Barbara’s executors claim 100% of Tom’s nil rate band as this was unused at the time of his death and this gives the executors an additional 100% nil rate band to use against Barbara’s estate.
  • s Barbara’s estate is valued at £650,000 and her executors have her nil rate band of £325,000 plus an enhancement of 100% from Tom, the whole estate is in the available nil rate band and no IHT is payable.
    What is the position if Tom had used part of his nil rate band? Let us take the scenario where Tom had made a potentially exempt transfer of £120,000 five years before he died. This was a gift to his children.
  • As Tom died within seven years of making the gift it uses up the first part of his nil rate band, before adding in the value of his estate at the time of his death. As there is no tax on this gift, taper relief is not available as this reduces tax rather than the value of a gift.
  • The nil rate band at the time of Tom’s death was £300,000 and the failed potentially exempt transfer uses 40% of the nil rate band leaving 60% unused. Everything else in Tom’s estate went to Barbara.
  • On Barbara’s subsequent death, her executors can claim Tom’s unused 60% for her estate. This gives the executors Barbara’s nil rate band of £325,000 plus an enhancement of 60%, meaning a total amount of £520,000 is available to be taxed at 0%.

Although an individual can have no more than a 100% enhancement, so a double nil rate band, in some circumstances, and with planning, it is possible for a couple to utilise up to four nil rate bands between them. This could occur where a widow and widower, or civil partners, marry and both have unused nil rate bands from their previous partners.

Residence nil rate band

This year saw the introduction of the residence nil rate band (RNRB) which was originally announced back in July 2015 and unused amounts can be transferred in a similar way to the standard nil rate band. This is irrespective of when the first death occurred and HMRC accept that everyone can transfer an RNRB from a first death before 6 April 2017, however, there are some caveats when considering the RNRB.

Under the new rules a transfer of a qualifying residential interest to a lineal descendant can utilise the RNRB, and for the purposes of this article we will not go into the detailed definition of a ‘qualifying residential interest’ or ‘lineal descendent’.

As the RNRB and these requirements did not exist before 6 April 2017 HMRC accept that a transferrable RNRB will exist and an amount will generally be available when the second death occurs after this date. One exception is where the estate on first death exceeded £2m as the RNRB is tapered where the estate exceeds this threshold amount. It is reduced by £1 for every £2 the estate is over this threshold.

For 2017/18 the RNRB is currently set at £100,000, so if the first death was any time before 6 April 2017 but the estate was valued at £2.2m or more at the time of death, no RNRB is able to be transferred. As the RNRB rises each year, in later years it will be completely removed where the estate exceeds £2.35m in the 2020/21 tax year.

Once the available RNRB has been established and transferred to the estate of the second spouse or civil partner to die, the normal rules for the RNRB apply. On the second death the RNRB can only be used where a deceased passes a qualifying residential interest on to a lineal descendent and the RNRB is tapered away for estates valued at more than £2m.



  • Jerry died in 2004 leaving everything to his wife, Margot, and his estate was worth less than £2m at the time of his death, so tapering does not apply.
  • On Margot’s subsequent death, the executors of her estate will be able to claim 100% of Jerry’s unused standard nil rate band plus 100% of Jerry’s RNRB, even though the RNRB was not available at the time of his death.
  • In the 2017/18 tax year the nil rate band available to Margot’s executors would total £850,000; consisting of 2 x £325,000 standard nil rate bands plus 2 x £100,000 RNRBs.
  • As the RNRB will rise over the coming years (£125,000 2018/19, £150,000 2019/20, and £175,000 2020/21) and the standard nil rate band is frozen at its current level, the amount of the total nil rate band available to Margot’s executors will increase up to £1m in the 2020/21 tax year. This would be made up of 2 x £325,000 standard nil rate bands plus 2 x £175,000 RNRBs.

The Government has announced that from April 2021, the standard nil rate band, the RNRB and the £2m threshold will all increase in line with CPI.

When valuing the estate for RNRB purposes and whether it is within the £2m threshold, the calculation of the estate value is different to the calculation for IHT purposes. For the RNRB valuation the estate is what the client owned at the time of death before any reliefs or exemptions are applied. Therefore:

- It does not include any lifetime gifts that have been made by the deceased in the seven years before death. If any gifts were made then they may still form part of the IHT calculation.

- Where any assets qualify for business relief (BR) or agricultural relief (AR), they are included in full before the application of any relief.

In the example above the value of Jerry’s and Margot’s estates for RNRB purposes could be different to the value of their estates for IHT purposes. Any lifetime gifts made remain in the IHT calculation for seven years but fall outside for the RNRB calculation, whereas BR and AR assets may qualify for relief against IHT, but the full value is included for RNRB purposes.



The ability to transfer the IHT nil rate bands has been around for nearly ten years now and is a valuable facility to allow married couples, civil partners, widows and widowers to maximise the available IHT nil rate band. In the past many may have used discretionary will trusts and whilst these can be advantageous in the right circumstances, transferring a nil rate band is a valuable option.
When advising clients it is important to establish what standard nil rate band and RNRB is available in order to correctly calculate a potential IHT liability. Planning is also important to ensure RNRB is maximised as not everyone will be entitled to this.


This article, written by Neil Jones from Canada Life's Technical Services Team, first appeared in Professional Paraplanner in May 2017.



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