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TX 06/12 Amended Question from the Exam Kit. Number 34 NING.
Because the husband passed away more than 7 years before his then band rate gets transferred to the current year band rate? As in instead of using his tax year 2003/04 nil rate band of 255000 when he died on 12 March 2004 we are using the current year rate band of 325000?
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When the first spouse dies their percentage unused nil rate band (if any) transfers to the surviving spouse to be used on their eventual death.
For example husband dies having made no lifetime transfers and leaves entire estate to spouse – the transfer to spouse is an exempt transfer so none of his nil rate band is used as there is no chargeability to tax, so the unused NRB is 100% – this would be 100% irrespective of whatever the amount of the NRB was at the date of his death – and this will transfer to his wife.
If the wife now dies when the current available NRB is 325,000 then this will be increased by 100% to 650,000 using the 100% unused NRB from her husband.
It does not matter whether the husband died within or more than 7 years before the wife’s death!
If husband died when available NRB was 300,000 and he used 120,000 of his NRB, this would leave 180,000 out of 300,000 unused ie 60% (or leave as a fraction 180/300).
Thus when wife dies when NRB is 325,000 her NRB will be increased by 60% – hence 160% x 325,000 = 520,000 is the revised NRB available on her death.
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