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Find out more'How much money can I pass on without paying inheritance tax?'
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I want to understand my available tax-free allowance for inheritance tax. I’m widowed; my husband passed away in 1996, and he left his entire estate to me.
My house is worth around £500,000 and I’ll be leaving everything to my two children.
Joan from Norwich
'Don't forget that you can also inherit allowances'
Samm Galloway, Which? money expert, says…
You should be able to pass on up to £1m free of inheritance tax.
This is because transfers between spouses or civil partners, whether during lifetime or on death, are exempt from inheritance tax. As you’re the sole beneficiary of your deceased spouse’s estate, his inheritance tax-free allowance was unused (assuming that he made no taxable gifts to other people during the seven years prior to his death).
This also means you inherited your husband’s inheritance tax-free allowance, to add to your own. Crucially, you don’t inherit the allowances as they were when your spouse died, but those that apply on the date of your death.
You inherited your husband’s inheritance tax-free allowance, to add to your own
Currently the nil-rate band is worth £325,000 per person and the residence nil-rate band – for passing on your property to a direct descendant, and which didn’t exist in 1996 – is worth £175,000. Double those and you get £1m.
If your husband hadn’t left everything to you and instead used part of his allowances, the value of those allowances available to you would have decreased proportionally. For instance, if he had used 10% of his nil-rate band, you would be able to use 90% of whatever the nil-rate band is worth when you die.
- Find out more: Inheritance tax calculator
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