What is the Nil Rate Band?

Nil Rate Band

The Nil Rate Band (NRB), also known as the Inheritance Tax (IHT) threshold, is the amount up to which an Estate has no IHT to pay.

The current allowance available on the Estate of an individual is £325,000; anything above this is taxed at 40%.

The NRB applies to property passing on death together with any taxable gifts made within the seven years before death.


In 2017, Dora dies leaving an estate to her son and daughter worth £325,000.

Dora has never owned a residence, as she was a tenant farmer all her life and lived in rented accommodation. IHT is payable as follows:

Chargeable estate 325,000
Less: nil rate band (325,000)
Balance 0
Tax at 40% 0

This threshold is per individual and it is also possible to transfer the allowance between married couples and civil partners.

The NRB is fixed at £325,000 until 2021.

From 6 April 2017, a Residence Nil Rate Band (RNRB) has also been available in addition to the NRB. To find out more about the RNRB, check out our blog ‘How Does the Residence Nil Rate Band Affect Farmers?

At Green & Co we have developed an Inheritance Tax and Estate Planning review in order to advise clients and their family fully with regard to these issues. If you would like to speak to one of our team, please feel free to contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Giving at Christmas – Inheritance Tax Allowances & Exemptions


Christmas is a time for giving…and most people are very happy if you give them money! However, it is worth remembering your allowances and exemptions for Inheritance Tax.

If your estate is worth more than the Inheritance Tax threshold – £325,000 for the 2013-14 tax year – there are some important Inheritance Tax exemptions that allow you to make gifts to others and not have to pay tax on them when you die:

Annual exemption 

You can give away gifts worth up to £3,000 in total in each tax year and these gifts will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but if you don’t use it in that year, the carried-over exemption expires.

In addition to the annual exemption there are other exemptions for certain types of gifts. These are explained below.

Small gifts 

You can make small gifts up to the value of £250 to as many individuals as you like in any one tax year. However, you can’t give more than £250 and claim that the first £250 is a small gift. If you give an amount greater than £250 the exemption is lost altogether.

You also can’t use your small gifts allowance together with any other exemption when giving to the same person.

Regular gifts or payments that are part of your normal expenditure 

Any regular gifts you make out of your after-tax income, not including your capital, are exempt from Inheritance Tax. These gifts will only qualify if you have enough income left after making them to maintain your normal lifestyle.

These include:

  • monthly or other regular payments to someone
  • regular gifts for Christmas and birthdays, or wedding/civil partnership anniversaries
  • regular premiums on a life insurance policy – for you or someone else

You can also make exempt maintenance payments to:

  • your husband, wife or civil partner
  • your ex-spouse or former civil partner
  • relatives who are dependent on you because of old age or infirmity
  • your children, including adopted children and step-children, who are under 18 or in full-time education

Exempt gifts

Some gifts made during your lifetime are exempt from Inheritance Tax because of the type of gift or the reason for making it:

Wedding gifts/civil partnership ceremony gifts

Wedding or civil partnership ceremony gifts are exempt from Inheritance Tax, subject to certain limits:

  • parents can each give cash or gifts worth £5,000
  • grandparents and great grandparents can each give cash or gifts worth £2,500
  • anyone else can give cash or gifts worth £1,000
  • You have to make the gift – or promise to make it – on, or shortly before, the date of the wedding or civil partnership ceremony. If the ceremony is called off and you still make the gift, or if you make the gift after the ceremony without having promised it first, this exemption won’t apply.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Article written by guest blogger, Andrew Tucker, Financial Planning Solutions Ltd