Watch out for the transerable nil rate band

Under the new inheritance tax provisions if your spouse doesn't utilise their nil rate band you'll effectively be entitled to an additional nil rate band. The key to this is that your own nil rate band at the date of your death is increased by the proportion of your spouses nil rate band that wasn't utilised. So if your spouse made a gift of £162,500 in the current tax year, prior to their death, and you died in 10 years time when the nil rate band was £500,000, you'd be entitled to your own nil rate band as well as another 50% nil rate band (ie a total of £750,000). By contrast if your spouse had not made the gift your nil rate band would have increased to £1,000,000. In this case the gift of £156,000 had caused a loss of relief for you of £250,000. If the nil rate band was increased substantially in the future (eg to the £1,000,000 limit as proposed by the Tories) this could represent an even larger loss. Of course this depends on the future level of the nil rate band as well as the rate at which the gifted assets increase in value.