IHTM43043 - Domicile/long term residence: calculation where the domicile/long term residence of the survivor at the first death is outside the UK
On the death of a first spouse or civil partner, IHTA84/S18 exemption (IHTM11031) is limited where the transferor听was domiciled听(IHTM13000)听in the UK听(to听5听April听2025)听or听a听long听term听UK听resident听(IHTM47000)听(from听6听April听2025)听and the transferee is domiciled outside the UK (to 5 April 2025) or not a long-term resident from (6 April 2025). The limit is imposed by IHTA84/S18(2). Since 6 April 2013听the limit has been equal to the nil-rate band at the date of transfer. Prior听to that date the听limit听was听拢55,000.听
If the entire estate passed to the surviving spouse or civil partner, anything over the S18(2) limit is a chargeable legacy. Where the net estate is above the nil听rate band plus the S18(2) limited exemption there will be no nil听rate band to transfer, as illustrated below.鈥�听
Example听
Susan died on听1 June 2008, domiciled听in the UK. She left an estate worth 拢450,000 all to her husband Lars who is domiciled in Sweden.鈥�听
Unused nil听rate band calculation听
M鈥�= 拢312,000听
VT鈥�= 拢395,000 (Estate of 拢450,000 less limited spouse exemption of 拢55,000)听
M is not greater than VT, so there is nothing to transfer.听
Where the net estate is less than the nil听rate band plus the S18(2) limit, there will still be an amount of nil听rate band available to transfer. The following example shows how both the amount that the net estate is below the nil听rate band, and limited spouse exemption, combine to produce the amount of nil听rate band available to transfer.鈥�听
Example听
Charles died on 8 April 2025听and was a 听long-term听UK resident. He left an estate worth 拢520,000 all to his wife Helga who is not a long-term听UK resident .听
Unused nil听rate band calculation听
M鈥�= 拢325,000听
VT鈥�= 拢195,000 (Estate of 拢520,000 less limited spouse exemption of 拢325,000)听
M is greater than鈥疺T by 拢130,000.听
Transferable nil听rate band calculation听
E鈥�=拢130,000听
NRBMD鈥�= 拢325,000 so听
(130,000 梅 325,000) 脳 100 = 40.0000%听
On Helga鈥檚 death, the nil听rate band on her death would be uprated by 40%. This approach will be appropriate on听the death of the survivor when either听
they remain听domiciled abroad/not a long-term听UK resident听and their UK assets exceed the single nil听rate band, or听
between the first death and their own, they became domiciled,听deemed听domiciled in the UK,听or听became听a long-term听UK resident听
However, if Helga elects to be treated as if she is domiciled in the UK(IHTM13040)/听a long term UK resident听under the provisions of IHTA84/S267ZA and S267ZB from a date before Charles鈥檚 death, the limit on the amount of spouse exemption will not apply and the nil rate band on her death would then be uprated by 100%.