Inheritance Tax - Transferring Nil Rate Band question

rayrad

My father died earlier this year and I'm in the process of organising his estate.  He has left everything to me and my sister - a house worth around £500K (no mortgage) plus cash & shares totalling around £160K.  My mother died in 2009, leaving her entire estate to my father - having made no gifts or transfers in the 7 years preceding her death.  I'm applying to transfer my mother's unused nil rate band.  The two combined (£325K x2 = £650K) would nearly cover the entire estate, meaning very little IHT to pay.  My problem, however, is this - the form for transferring nil rate band (IHT402) asks for "the net value of the spouse or civil partner's estate passing under their will".  As my father was executor of my mother's will - and cannot be asked - and there is no record of probate having been applied for on her estate - I am at a loss as to how to calculate this figure.  My mother only held joint current accounts with my father which would have been transferred into his single name and she had a state pension - so it will be small.  The calculations elsewhere on the form for how much nil rate band can be transferred do not factor this figure in.  So in theory the value of her estate shouldn't impact the transferrable nil rate band.  Can anyone advise if that is correct?  Many thanks in advance!

[Deleted User]

You are correct. Have a read of this.

https://www.nlfm.co.uk/blog-post/all-you-need-know-about-transferable-nil-rate-band

So you mean that if I inherited all the assets from my spouse or civil partner, my executors could add his or her nil rate band to the nil rate band that applies when I die? 

Essentially yes – but it works by looking at what proportion of the nil rate band that was unused when your spouse or civil partner died and uprating the nil rate band available when you die by that same proportion.

Also read the very first note which accompany this form.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/497793/IHT402.pdf

rayrad

That's fantastic - many thanks!  And thanks for the link to that 'all you need to know' page too - very helpful.  In regards to working out the value of my mother's estate, I had followed the advice of that first note, yes.  "You can find the net value of the estate passing under the will or intestacy on the copy of the grant of representation (if one was taken out) or by adding together all the assets in the estate and deducting any liabilities – please note that if the grant shows tax or duty as having been paid there will be no nil rate band available for transfer."  Unfortunately, there is no record of probate / grant of representation for my mother (I have checked the government website - gov.uk/search-will-probate - she's not there).  I'm assuming, then, that's it's reasonable to look at what my father received from their joint account - i.e. whatever passed to his sole account on the closure of their joint account - and list that as the value of her estate.  As her estate would have been small, I imagine he would have not had to fill out IHT400 - but simply IHT205, stating that no IHT is due.  I can't find a copy of this among his papers.  Is there any way of sourcing it directly from HMRC?  And (and I hope this isn't true...) if he failed to submit either form, am I up the swanee?!  Again, any advice very much appreciated

[Deleted User]

I meant the very first paragraph of the notes - if your father inherited all of your mother’s estate none of it used up any part of her threshold and all of that threshold would be transferable.

Box No 7 would be Nil.

Your claim to transfer unused Inheritance Tax nil rate band

Where most or all of an estate passes to someone’s surviving spouse or civil partner, those assets are generally exempt from Inheritance Tax. This means that most or all of the nil rate band available on the first death is not used.

rayrad

Ah-ha!  Perfect.  Thanks so much for taking the time to reply and for your help.  Very much appreciated!