Under the UK inheritance tax spouse exemption, anything you leave to a husband, wife, or registered civil partner passes free of inheritance tax, with no upper limit, as long as both of you are long-term UK residents. The rule sits in Section 18 of the Inheritance Tax Act 1984 and applies to lifetime gifts as well as transfers on death.1Legislation.gov.uk. Inheritance Tax Act 1984 – Section 18 For most couples it is the single biggest reason a surviving partner keeps the house, the savings, and the pension without an immediate 40% tax bill.
Who Counts as a Spouse or Civil Partner
The exemption depends entirely on legal status at the moment assets change hands. You need to be lawfully married or in a registered civil partnership. Same-sex marriages count (recognised from March 2014 in England and Wales, December 2014 in Scotland, and January 2020 in Northern Ireland), as do civil partnerships formed under the Civil Partnership Act 2004.2HMRC Internal Manuals. Inheritance Tax Manual – IHTM11032 – Spouse or Civil Partner Exemption: Definition of Spouse and Civil Partner
Living together is not enough. There is no “common law marriage” for inheritance tax, however long you have been together and however entangled your finances are. A cohabiting partner inherits as an unrelated person and can face 40% tax on anything above the nil rate band.
Separation and Divorce
Separated spouses still qualify. HMRC treats legally separated couples as married for these purposes, and the exemption only falls away once a decree absolute ends the marriage or a final order dissolves the civil partnership.2HMRC Internal Manuals. Inheritance Tax Manual – IHTM11032 – Spouse or Civil Partner Exemption: Definition of Spouse and Civil Partner If one partner dies mid-divorce but before that final order, the surviving spouse can still claim the full exemption. In contested estates that timing can decide the tax bill.
What the Exemption Covers
The exemption applies during life and on death. There is no monetary ceiling when both spouses are long-term UK residents. You can give your spouse your whole estate, a share of a business, an investment portfolio, or the house at any point during the marriage without triggering inheritance tax.1Legislation.gov.uk. Inheritance Tax Act 1984 – Section 18 For lifetime gifts, the receiving spouse must be living permanently in the UK.3GOV.UK. How Inheritance Tax Works: Thresholds, Rules and Allowances – Rules on Giving Gifts
How you own property changes the mechanics but not the tax result. Joint tenants pass their share to the survivor automatically by right of survivorship, outside the will. Tenants in common pass their share by the will.4GOV.UK. Joint Property Ownership Either way, the spouse exemption covers the transfer and no inheritance tax arises on the inherited share.
When Your Spouse Is Not a Long-Term UK Resident
From 6 April 2025, the old domicile-based rules were replaced by a residence-history test. You are a “long-term UK resident” if you have been UK tax resident for at least 10 of the 20 tax years before the transfer or death.5GOV.UK. Inheritance Tax if Youre a Long-Term UK Resident This change feeds directly into the spouse exemption.
Where the person making the transfer is a long-term UK resident but the receiving spouse is not, the unlimited exemption is capped at the nil rate band, currently £325,000. Anything above the cap is taxed at 40%.1Legislation.gov.uk. Inheritance Tax Act 1984 – Section 18 The same cap applies where neither spouse is a long-term UK resident but UK assets are involved. For cross-border families it is the sharpest edge in the whole regime.
Electing to Be Treated as Long-Term Resident
A non-long-term-resident spouse can elect to be treated as one, which restores the full unlimited exemption. The old Section 267ZA election was removed by the Finance Act 2025 and replaced with a new mechanism tied to the residence-based framework.6Legislation.gov.uk. Inheritance Tax Act 1984 – Section 267ZA Under the new rules the election runs until the electing spouse has been non-UK resident for 10 consecutive tax years. The catch is that while the election is in force, the electing spouse’s worldwide assets fall within UK inheritance tax. In some estates that creates a bigger bill at the survivor’s death than it saves at the first, so this is a decision to take with specialist advice, not on the back of an envelope.
The Unused Nil Rate Band Transfers to the Survivor
When one partner leaves everything to the other, the spouse exemption covers the whole transfer, so none of the deceased’s nil rate band is used. That unused allowance is not lost. It transfers to the surviving spouse’s estate, effectively doubling the tax-free threshold on the second death.
The standard nil rate band is frozen at £325,000 until at least April 2028, so a surviving spouse who inherited everything can pass up to £650,000 free of inheritance tax on their own death.7GOV.UK. Inheritance Tax Nil-Rate Band and Residence Nil-Rate Band Thresholds From 6 April 2026 to 5 April 2028 If the estate includes a home left to direct descendants, the residence nil rate band of £175,000 is also transferable, giving a combined potential total of £1 million tax-free for couples: £650,000 from the standard band and £350,000 from the residence band.8GOV.UK. Work Out and Apply the Residence Nil Rate Band for Inheritance Tax
The residence nil rate band tapers for estates worth more than £2 million, reducing by £1 for every £2 above the threshold, and can disappear entirely for large estates. Where the first spouse’s estate was covered by the spouse exemption but was itself worth more than £2 million, the tapering calculation still runs to work out how much unused residence nil rate band can be transferred to the survivor.8GOV.UK. Work Out and Apply the Residence Nil Rate Band for Inheritance Tax
The transfer is not automatic. Executors of the second estate claim the unused standard band on Form IHT402, and the unused residence band on Form IHT436, filed with the IHT400 account.9GOV.UK. Inheritance Tax: Claim to Transfer Unused Nil Rate Band (IHT402) That means holding onto the paperwork from the first death: the grant, the will, and evidence of how the estate was distributed.
Fixing a Will With a Deed of Variation
Sometimes the will does not route assets to the spouse in the most tax-efficient way. A deed of variation lets beneficiaries redirect the estate after death, and HMRC treats the revised distribution as if the deceased had written it that way. The deadline is two years from the date of death.10Legislation.gov.uk. Inheritance Tax Act 1984 – Section 142
Every beneficiary made worse off by the change has to agree. The variation must be in writing and state that the parties intend it to take effect for inheritance tax. If the variation increases the tax bill, a copy goes to HMRC within six months of making it.11GOV.UK. Change a Will After a Death Where the variation reduces or eliminates tax by pushing more to the surviving spouse, no notification is needed.
This is one of the most underused planning tools available. Where a will splits assets between a spouse and adult children, and the children are willing to redirect their shares to the surviving parent, a deed of variation can bring those assets under the spouse exemption and eliminate the inheritance tax bill at the first death. The children take nothing immediately but stand to inherit a larger estate later.
Reporting the Exemption to HMRC
Not every estate benefiting from the exemption needs a full inheritance tax return. If the deceased left everything to a UK-resident spouse or civil partner and the gross estate is worth less than £3 million, it usually qualifies as an “excepted estate.” Executors report it through the probate application without filing an IHT400.12GOV.UK. How to Value an Estate for Inheritance Tax and Report Its Value – Check Type of Estate
Where a full account is required, executors file Form IHT400 with HMRC. The deadline is 12 months from the end of the month in which the death occurred. Late filing brings an initial £100 penalty, a further £100 if the account arrives between six and twelve months late, and monthly penalties of £10 to £400 after that up to a £3,000 cap.13GOV.UK. Inheritance Tax Manual – IHTM36023 – Late Accounts: Penalties Chargeable The IHT400 asks executors to list gross asset values and then deduct the spouse exemption to arrive at the taxable figure. A valid marriage or civil partnership certificate supports the claim.
Instalments When the Estate Is Only Partly Exempt
In some estates the spouse exemption covers most but not all of the assets. A will might leave the family home to a surviving spouse and a separate investment property to a child, and the child’s inheritance can trigger tax even though the spousal transfer is exempt. Where that tax falls on assets that are hard to sell, executors can pay in equal annual instalments over ten years.
Qualifying assets include land and buildings, controlling shareholdings, unlisted shares meeting certain thresholds, and businesses run for profit. Where the assets qualify for agricultural relief or business relief, the instalments are interest-free from 6 April 2026 onward. Other qualifying assets carry interest on the outstanding balance.14GOV.UK. Pay Your Inheritance Tax Bill: In Yearly Instalments Executors elect for instalments on the IHT400.
A Deferral, Not an Elimination
Everything a surviving spouse inherits becomes part of their own estate, so the tax is postponed rather than removed. The transferable nil rate bands soften the second-death bill, but for combined estates above £1 million there can still be a substantial charge at 40%. Couples where one partner is not a long-term UK resident have the most to review: the £325,000 cap catches cross-border families unexpectedly, and the election to be treated as a long-term resident has consequences that run well beyond the immediate saving. The nil rate band has been frozen since 2009 and will stay at £325,000 until at least April 2028, after which it is scheduled to rise with the Consumer Prices Index unless Parliament decides otherwise.15GOV.UK. Inheritance Tax Nil-Rate Band, Residence Nil-Rate Band From 6 April 2028 Estates keep growing while the threshold stays flat, which means the spouse exemption and the transferable bands do more work each year.