Is it true that married couples can now leave their nil-rate band to each other?

Yes it is.  Where one party to a marriage or civil partnership dies and does not use their nil rate band to make tax free bequests to other members of the family, the unused amount can be transferred and used by the survivor’s estate on their death. This only applies where the survivor died on or after 9 October 2007.

In effect, spouses and civil partners between them now have a nil rate band that is worth up to double the amount of the nil rate band that applies on the survivor’s death.

For example, if on the death of the first spouse, they leave legacies of £32,5000 to each of 4 children, the sum of £130,000 would be chargeable to IHT.  However, because this is below £325,000, the legacies pass free of tax and £195,000 (or 60%) of the nil rate band is unused. This unused amount can be transferred to the estate of the survivor. If the nil rate band is say £400,000 when the survivor dies, the inheritance tax nil-rate band for the surviving spouse would be increased by 60% to £640,000.