Inheritance tax liability — with RNRB and the £2m taper

Transferable allowances must be claimed, not assumed. The unused percentage of a deceased spouse's NRB transfers to the survivor — but the transfer is only activated if the survivor's personal representatives file form IHT402 on the second death (alongside IHT400). The claim must be made within two years of the second death. Families sometimes miss this entirely because the first estate was small and didn't require a grant; the paperwork is still needed.

Not all RNRB is transferable automatically. If the first spouse left their home to a discretionary trust rather than to the survivor or direct descendants, the RNRB is used up against a non-qualifying transfer and cannot be fully transferred. The fix exists — IHTA 1984 s144 allows the trust to be unwound within two years of the first death and the home redirected to descendants, restoring the RNRB. Outside that window, the loss is permanent.

The £2m taper threshold matters more than most people realise. For every £2 the estate exceeds £2 million, £1 of RNRB is lost — so an individual loses their £175k RNRB entirely at £2.35m, and a couple loses their combined £350k RNRB entirely at £2.7m. Lifetime gifts that bring the estate below the threshold restore the full RNRB. For estates around the £2m-£2.3m band, the taper saving from planning can exceed £70k of IHT.

Gift with reservation rules defeat the obvious move. Giving away your home while continuing to live in it does not remove it from your estate — FA 1986 s102 pulls it back under the gift-with-reservation rules. Lifetime gifts of liquid assets (cash, investments, pension wealth pre-April 2027) work much better than lifetime gifts of the home itself.

Allowances are frozen to April 2030. The £325k NRB and £175k RNRB are fixed until 6 April 2030, which means the effective tax rate on a typical estate rises each year as property values and other assets grow past the frozen thresholds. The planning horizon that matters is the seven years it takes for a potentially exempt transfer to fall out of the estate — which is why IHT planning is a decade-plus project, not a deathbed one.