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Application of the nil rate band

The nil rate band excludes a substantial portion of the deceased estate from a charge to tax, and takes the majority of estates out of the inheritance tax bracket entirely. Technically, the portion is still charged to tax, but at 0%. The threshold is currently £325,000, which means that its value to the taxpayer is £130,000.

However, the free estate at death may not benefit from the whole nil rate band. Because of the way the cumulation principle works, part of it may be allocated to transfers in the preceding seven years. In addition, other components which become chargeable on death, such as settled property and gifts