I have the following scenario:
H died August 2019. He had surviving spouse (W2) and had previously been widowed (W1). We claimed transferable nil rate band and transferable residence nil rate band from W1’s estate - all wholly unused on her death. That gave H’s estate NRB of £650,000 and RNRB of £300,000.
W2 carried out variation gifting £200,000 cash and £350,000 half-share of property to son.
I have two questions on calculating the NRB and RNRB:
If the total chargeable gifts to son in DoV are £550,000, can we apply those gifts to the NRBs available in any way or are they utilised in a particular order? For example, could we apply £150,000 of the gift of the property to the RNRB of £300,000 leaving £150,000 unused with £400,000 of the remaining gift applied to the NRB?
The unused NRB on H’s death is based on the total available (including TNRB). IHTM43032 has an example of the calculation. If total NRB is £650,000 on H’s death and £400,000 used then percentage to apply to W2’s NRB is 38%. Is the calculation of the unused RNRB the same? Qs 16 to 22 of IHT436 indicate that the calculation is different. I have Default Allowance in box 16 as £300,000, say amount of RNRB used as £150,000. Box 18 is then £150,000 and box 20 then gives 100% so an increase in W2’s RNRB to £350,000.
I would welcome comments on above.