Can I use my spouse’s nil rate band?

At Towerstone, we provide specialist Inheritance Tax accountancy services for families and executors. We have written this article to explain how the nil rate band can transfer between spouses, helping you make informed decisions.

This is one of the most important inheritance tax questions a married couple or civil partners can ask, and in my opinion it is also one of the most reassuring areas of UK inheritance tax once it is properly understood. From experience many people worry about inheritance tax unnecessarily because they do not realise just how generous the spousal rules can be when they are used correctly.

I regularly speak to couples who assume that each person’s inheritance tax position is fixed and separate. They believe that if one spouse dies without using their allowance it is simply lost. In reality the UK inheritance tax system allows spouses and civil partners to effectively pool allowances across both deaths, provided things are structured properly.

In this article I will explain what the nil rate band is, how it works between spouses and civil partners, how the transferable nil rate band operates, how it interacts with the residence nil rate band, and the real world situations where things can go wrong. I will also share what I have learned from experience about how to make sure your spouse’s nil rate band is not wasted.

What Is the Nil Rate Band

The nil rate band is the amount of an estate that can be passed on free of inheritance tax.

At the time of writing the standard nil rate band is £325,000. This means that if the total value of your estate on death is £325,000 or less there is no inheritance tax to pay.

Any value above the nil rate band is normally taxed at 40 percent unless reliefs or exemptions apply.

In my opinion the nil rate band is often talked about as if it were complicated, but the basic concept is straightforward. What makes it more complex is how it interacts with spouses, property, gifts, and lifetime planning.

The Spouse and Civil Partner Exemption

Before we talk about using a spouse’s nil rate band it is important to understand the spouse exemption.

Transfers between spouses or civil partners are usually completely free of inheritance tax, regardless of the amount involved. This applies both during lifetime and on death.

From experience this exemption is the foundation of most inheritance tax planning for couples. It means that when the first spouse dies, assets can usually pass to the surviving spouse without any inheritance tax at all.

However and this is critical, just because no tax is paid on first death does not mean the nil rate band has been used.

What Happens to the Nil Rate Band on First Death

If assets pass to a spouse or civil partner on death, the spouse exemption applies and no inheritance tax is paid. Because of this the nil rate band is not used at all.

In simple terms, if everything passes to the surviving spouse, 100 percent of the nil rate band remains unused.

From experience this is where confusion often arises. People assume that because no tax was paid the allowance must have been used. In fact the opposite is true.

This unused allowance can be transferred to the surviving spouse and used on their death.

The Transferable Nil Rate Band Explained

The transferable nil rate band allows a surviving spouse or civil partner to use any unused portion of their late spouse’s nil rate band when they die.

This means that on the second death the nil rate band can effectively be doubled.

In practice this works as follows:

Each individual has a nil rate band of £325,000

If the first spouse uses none of their nil rate band, 100 percent is unused

The surviving spouse can claim that unused 100 percent

The surviving spouse then has a combined nil rate band of up to £650,000

In my opinion this is one of the most generous and sensible features of the UK inheritance tax system, yet many people are not aware of it.

How the Transfer Is Calculated

One important point from experience is that the transferable nil rate band is based on a percentage, not a fixed cash amount.

This matters because the nil rate band can change over time.

If the first spouse dies when the nil rate band is £300,000 and leaves everything to the surviving spouse, 100 percent of their nil rate band is unused. When the second spouse dies, that 100 percent is applied to the nil rate band at that time, not the old amount.

In my opinion this is an elegant solution and ensures fairness over time.

Do I Need to Do Anything to Transfer It

The transfer of the nil rate band is not automatic. A claim must be made by the executors of the second estate.

From experience this is usually done as part of the inheritance tax return on the second death.

To make the claim you need evidence of:

The first spouse’s death

How their estate was distributed

That the nil rate band was not fully used

This is why keeping records such as wills and probate documents is so important.

What If the First Spouse Used Some of Their Nil Rate Band

The good news is that you can still transfer whatever proportion of the nil rate band was unused.

For example:

If the first spouse used 50 percent of their nil rate band

The remaining 50 percent can be transferred

The surviving spouse can add that 50 percent to their own nil rate band

From experience this often applies where some assets were left to children or other beneficiaries on first death.

In my opinion this flexibility is very helpful and avoids the all or nothing outcomes people sometimes fear.

Common Scenarios I See in Practice

Everything Left to the Spouse

This is by far the most common scenario.

From experience:

No inheritance tax is paid on first death

100 percent of the nil rate band is unused

The full allowance can be transferred

The second estate benefits from a doubled nil rate band

In many cases this alone eliminates inheritance tax entirely.

Gifts to Children on First Death

Sometimes a will leaves a gift to children on first death, often for emotional or family reasons.

From experience this can still work well, but it does mean part of the nil rate band may be used.

The key is understanding how much has been used and documenting it properly so the remaining portion can be claimed later.

Old Nil Rate Band Trust Wills

Before the transferable nil rate band was introduced many wills included nil rate band trusts.

From experience these can still be valid but they sometimes complicate matters unnecessarily now.

In my opinion these wills should be reviewed carefully, as they can affect how much of the nil rate band is actually used on first death.

How the Nil Rate Band Interacts With the Residence Nil Rate Band

The residence nil rate band is an additional allowance for passing a home to direct descendants.

This allowance can also be transferred between spouses or civil partners.

From experience this is where planning becomes more nuanced.

At present:

The residence nil rate band is up to £175,000 per person

It can be transferred if unused

A married couple can potentially pass on £1 million free of inheritance tax

This assumes:

A qualifying residential property

Direct descendants inherit

The estate is below the taper threshold

In my opinion the interaction between these allowances is one of the most powerful inheritance tax planning tools available to couples.

When the Transferable Nil Rate Band Can Be Lost or Restricted

Although the rules are generous, there are situations where things do not work as expected.

From experience these include:

Poorly drafted wills

Failure to keep records

Trust structures that unintentionally use allowances

Large lifetime gifts that were not considered

Assumptions made without calculations

In my opinion inheritance tax problems rarely arise because the rules are harsh. They arise because planning was not reviewed as circumstances changed.

Remarriage and the Nil Rate Band

Remarriage can complicate inheritance tax planning.

From experience it is important to understand that you can only transfer the nil rate band from one spouse.

If someone has been married more than once, only the nil rate band from their most recent spouse can be transferred.

In my opinion this is an area where professional advice is particularly valuable, especially where there are children from previous relationships.

Civil Partnerships and Nil Rate Bands

Civil partners are treated in the same way as married couples for inheritance tax purposes.

From experience there is no difference in how the transferable nil rate band applies.

This equality is now well established in UK tax law and provides clarity and consistency.

Lifetime Gifts and Their Impact on the Nil Rate Band

Lifetime gifts can affect how much of the nil rate band is used.

If chargeable lifetime transfers were made within seven years of death they may use part of the nil rate band.

From experience this can reduce the amount available to transfer.

This does not mean lifetime gifts are a bad idea. It simply means they need to be considered as part of the wider plan.

Record Keeping and Evidence

One practical issue I always stress is record keeping.

To claim a spouse’s unused nil rate band you need evidence of how the first estate was dealt with.

From experience this includes:

The first spouse’s will

Probate papers

Details of gifts made

Valuations where relevant

Good records make the claim straightforward. Poor records can delay matters and increase stress for families.

What I Usually Recommend From Experience

When advising couples I usually recommend the following:

Ensure wills are up to date

Understand how assets pass on first death

Avoid unnecessary use of the nil rate band early

Keep clear records

Review plans after major life events

In my opinion this approach balances simplicity with flexibility.

Key Takeaways

So can you use your spouse’s nil rate band. In most cases the answer is yes, and when used correctly it can dramatically reduce or eliminate inheritance tax.

In my opinion the transferable nil rate band is one of the fairest aspects of the UK inheritance tax system. It recognises that couples plan together and should not be penalised simply because assets are held in one name or the other.

From experience the key is not clever schemes or complex structures. It is understanding the rules, keeping things simple where possible, and reviewing plans regularly.

If there is one message I would leave you with it is this. Many inheritance tax worries disappear once the spousal nil rate band is properly understood. For most couples the problem is not the tax itself but the lack of clear information and proactive planning.

If you would like to explore related Inheritance Tax guidance, you may find Can my spouse or partner inherit my estate tax free and Do I need an accountant to complete an Inheritance Tax return useful. For broader inheritance tax guidance, visit our inheritance tax hub.