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IHTM46041 explains how the brought-forward allowance (IHTM46040) is calculated and how it increases the residence nil-rate band (RNRB) that is potentially available to the estate of the surviving spouse or civil partner. However this increased RNRB can only be used on the survivor鈥檚 estate to the extent that there is a qualifying residential interest (QRI) (IHTM46011) which is closely inherited (IHTM46013). The brought-forward allowance is not simply an addition to the RNRB that is due. The examples below show how the brought-forward allowance affects the total RNRB available to an estate.

Example 1

David died in August 2015 with an estate valued at 拢500,000, which he left to his civil partner, Daniel.

Daniel died in December 2018 when the residential enhancement (IHTM46022) was 拢125,000. Daniel left an estate of 拢800,000 including a house worth 拢400,000. He left the whole of his estate to his children.

The unused RNRB in David鈥檚 estate is treated as being 拢100,000 in accordance with IHTA84/S8G(4)(a) because his death was before 6 April 2017. This is 100% of the residential enhancement that is treated as being available at his date of death in accordance with IHTA84/S8G(4)(b). Daniel鈥檚 estate is entitled to claim a brought-forward allowance of 100% of the residential enhancement at Daniel鈥檚 date of death, which is 拢125,000.

This brought-forward allowance (拢125,000) is added to the residential enhancement available on Daniel鈥檚 death (拢125,000) to give Daniel鈥檚 estate a default allowance (IHTM46024) of 拢250,000.

As Daniel鈥檚 estate is below the taper threshold (IHTM46023), there is no reduction made to the default allowance.

Daniel leaves a house worth 拢400,000 to his children. Daniel鈥檚 estate is entitled to RNRB equal to the lower of 拢250,000 (his default allowance) or the value of the residence that is left to his children (拢400,000). Daniel鈥檚 estate therefore qualifies for RNRB of 拢250,000.

Example 2

The facts were the same as in Example 1 above, but Daniel leaves the whole of his estate to his nephew.

Daniel鈥檚 estate is entitled to claim a brought-forward allowance of 拢125,000 in respect of the unused RNRB in David鈥檚 estate.

This brought-forward allowance (拢125,000) is added to the residential enhancement available on Daniel鈥檚 death (拢125,000) to give Daniel鈥檚 estate a default allowance of 拢250,000.

As Daniel鈥檚 estate is below the taper threshold, there is no reduction made to the default allowance.

Although Daniel鈥檚 estate has a default allowance of 拢250,000, there is no QRI being closely inherited from his estate. There is therefore no RNRB available to Daniel鈥檚 estate.