Spouse Exemption for Inheritance Tax Explained

Under UK law, transfers of assets between spouses or civil partners are generally completely exempt from Inheritance Tax. The exemption applies both to lifetime gifts and to anything passed on death. There is no upper limit on the value of what can pass tax-free — so even a multi-million pound estate left entirely to a surviving spouse will, in most cases, attract no IHT at all on the first death.

The exemption only applies to legally married couples and registered civil partners. Cohabiting partners, even those who have lived together for decades or have children together, do not qualify. This is one of the most important practical differences between marriage or civil partnership and cohabitation from a tax point of view, and it catches a surprising number of families off guard.

Each person has an Inheritance Tax nil-rate band — the amount that can pass tax-free at death without using any exemptions. For the 2026/27 tax year, the nil-rate band is £325,000 and the additional residence nil-rate band, which applies when a qualifying home is passed to direct descendants, is £175,000.

If the first spouse to die leaves everything to the surviving spouse, none of their nil-rate band is used. The unused percentage can be transferred to the survivor's estate and applied on the second death. This is known as the transferable nil-rate band (TNRB), and a parallel rule allows the residence nil-rate band to transfer in the same way.

In practice, this means a married couple with a qualifying home passed on to children can often pass up to £1 million tax-free across two deaths: two nil-rate bands of £325,000 (£650,000) plus two residence nil-rate bands of £175,000 (£350,000). The figures depend on the size of the estate, who inherits the home and whether any of the nil-rate band was used by other gifts.

For the current tax year, the figures most people need to know are:

These figures are frozen until at least April 2028. The residence nil-rate band tapers away for estates worth more than £2 million, reducing by £1 for every £2 above that threshold, which is something larger estates need to plan around.

Until April 2025, the UK's IHT system worked on the concept of domicile. From 6 April 2025, the rules switched to a residence-based system. An individual who has been resident in the UK for at least 10 of the previous 20 tax years is now classed as a long-term resident (LTR) for IHT purposes.

This matters for spouse exemption in international couples. Where both spouses share the same long-term residence status — both LTR or both not LTR — the exemption between them is unlimited, as before. Where one spouse is LTR and the other is not, transfers from the LTR spouse to the non-LTR spouse are limited. The unrestricted amount is now capped at the level of the nil-rate band (£325,000 for 2026/27), broadly matching the previous domicile cap. A non-LTR spouse can elect to be treated as LTR for IHT purposes, which restores the unlimited exemption but brings the world-wide estate into UK IHT.

If you have international family circumstances, this is a complex area and worth professional advice.

A few patterns come up regularly. Some couples assume their assets will automatically pass to each other on intestacy, but if there is no will the statutory rules may divide the estate between the surviving spouse and other relatives. Some couples hold their main home as tenants in common with each owning a defined share, but do not have wills that take account of this, which can produce unexpected IHT consequences. And some couples assume the residence nil-rate band always applies — but it tapers above £2 million and is only available when a qualifying home passes to direct descendants.

Leaving everything to the surviving spouse is straightforward and tax-efficient on the first death, but it is not always the most tax-efficient outcome across both estates combined. Couples with larger estates sometimes use other strategies — making lifetime gifts, using surplus income gifts, or structuring assets through trusts — to manage the eventual liability. These are areas where regulated financial and legal advice is normally appropriate.

The spouse exemption itself is simple, but estate planning around it can be intricate. The right approach depends on the size and composition of your estate, your family circumstances, your residence status and your wishes. A regulated financial adviser — and usually a solicitor for the will and any trust documents — can help you understand the options available in your specific circumstances.

Our article on How to Reduce Inheritance Tax Legally covers a range of strategies available to married couples and others with estates above the threshold.