Inheritance Tax and Divorce UK: What Happens to Your Will, the Spousal Exemption, and IHT on Divorce (2026)
Divorce extinguishes the IHT spousal exemption, voids gifts to your ex in your will, removes intestacy rights, and changes CGT treatment on asset transfers. Understanding the exact date of the final order is critical for IHT and CGT planning.
| Scenario | IHT Position | CGT Position | Action Required |
|---|---|---|---|
| Transfer assets to spouse BEFORE final divorce order (during separation) | s18 IHTA spousal exemption still applies — unlimited; no IHT on transfer between spouses | s58 TCGA no-gain/no-loss until final order (Finance Act 2023 extended period); transfers at base cost | Transfer valuable assets (property, investments) before final order to use spousal exemption and CGT no-gain/no-loss |
| Transfer assets to ex-spouse AFTER final divorce order | s18 IHTA spousal exemption CEASES on final order; ex-spouse treated as stranger; gift = PET (s3A IHTA); 7yr clock; IHT if failed PET + above NRB | s58 TCGA no-gain/no-loss ENDS; transfer at market value (s17 TCGA — connected persons); CGT on accrued gain | Update will IMMEDIATELY after final order; execute new will or codicil; update property registration; update all financial accounts |
| Die during divorce proceedings (before final order) | STILL MARRIED at death; s18 IHTA spousal exemption applies; assets pass to (ex-)spouse tax-free; unlimited | CGT death uplift (s62 TCGA) — no CGT on death; surviving spouse inherits at market value | Critical planning risk: ensure will reflects current intentions; a separation agreement does NOT change will or intestacy rights |
| Former spouse dies after divorce (both still alive at divorce) | No tNRB (s8A IHTA) — tNRB only transfers to surviving spouse; ex-spouse's NRB is not transferable after divorce; no IHT benefit to ex-spouse's estate | No CGT impact at death of ex-spouse on the living ex-spouse | Ex-spouses should both make new wills after divorce; mutual inheritance rights are extinguished |
| Spouse died while married — surviving spouse later divorces and remarries | tNRB from deceased first spouse RETAINED by surviving spouse even after divorce and remarriage; executor claims on second death (s8A IHTA 1984); applies to surviving spouse's estate on death | No CGT impact on tNRB carry-forward | Executors of the surviving spouse must claim tNRB from EACH prior deceased spouse; IHT402 for each; up to 100% additional NRB |
| Financial settlement on divorce — cash/property to ex-spouse under consent order | s11 IHTA 1984: reasonable maintenance or financial provision for ex-spouse or children = IHT-exempt; NOT a PET; no 7yr clock. Unreasonable/excessive payments may be partially PETs. HMRC tests 'reasonableness' | s58 no-gain/no-loss ends at final order; property transfer under consent order = market value disposal; CGT if accrued gain; PPR relief (s222 TCGA) if main residence | Transfer assets under consent order before final order where possible; structure as reasonable financial provision; take advice on CGT on property transfers under consent order |
IHT spousal exemption: s18 IHTA 1984 — unlimited; ceases on final divorce order (Divorce, Dissolution and Separation Act 2020). s11 IHTA 1984: reasonable maintenance/financial provision for ex-spouse or children = IHT-exempt (not a PET). Wills: s18A Wills Act 1837 — gift to ex-spouse and executor/trustee appointment void on final order; rest of will valid; ex-spouse treated as predeceased for will purposes. Intestacy: Administration of Estates Act 1925 — ex-spouse loses all rights from final order. tNRB: s8A IHTA 1984 — only if deceased spouse died while still married; survives subsequent divorce of surviving spouse. CGT: s58 TCGA 1992 no-gain/no-loss — extended to date of final order (Finance Act 2023); ends on final order. After final order: s17 TCGA market value disposal applies. PPR: s222 TCGA for main residence. Pension nominations: not legally binding; update immediately on divorce. England and Wales only — Scotland has different rules under Succession (Scotland) Act 1964.
IHT and Divorce: Complete Guide
What happens to the IHT spousal exemption on divorce?
The unlimited IHT spousal exemption (s18 IHTA 1984) applies to transfers between spouses and civil partners — in lifetime and on death. On the date of the final divorce order (called the 'final order' under the Divorce, Dissolution and Separation Act 2020 — previously the 'decree absolute'), the marriage is dissolved. From that date, the ex-spouse is no longer a spouse for IHT purposes and the s18 exemption CEASES. Before the final order — including during the period of legal separation: the spousal exemption still applies. Transfers of assets between separating spouses remain IHT-exempt and CGT-neutral (see below). After the final order: the ex-spouse is treated as a stranger for IHT. Any gifts from one ex-spouse to the other are PETs (s3A IHTA — outright gifts to individuals; 7-year clock; IHT if the donor dies within 7yr and the gift is above the NRB). For IHT planning: if divorcing spouses intend to transfer assets to each other, doing so BEFORE the final order preserves the s18 spousal exemption and the CGT no-gain/no-loss treatment. After the final order, such transfers lose both the IHT exemption and the CGT relief. There is no IHT issue on the court order for maintenance or financial provision under s11 IHTA 1984 (see below) — but outright gifts beyond reasonable provision are PETs.
What happens to your will when you divorce?
Under Wills Act 1837 s18A (as inserted by Family Law Act 1996 and re-enacted — England and Wales), divorce (or dissolution of a civil partnership) automatically revokes: (1) any appointment of the former spouse as executor or trustee in the will; and (2) any gift to the former spouse in the will. The former spouse is treated, for the purposes of the will, as having died on the date of the final order. The effect: the rest of the will remains valid. Any substitute gift named in the will ('if my spouse predeceases me, to my children in equal shares') takes effect. Any gifts to other beneficiaries are unaffected. What is NOT automatically revoked: the will itself does not need to be remade for it to remain valid; only the former spouse's gifts and appointments are void. If the testator dies without remaking the will, the estate passes: (a) any gift that was to the ex-spouse (now void) → the substitute beneficiary (if named) or the residue; (b) if the gift to the ex-spouse WAS the residue, and the substitute beneficiary is the ex-spouse's children or the testator's children equally, that alternative gift is effective; (c) if the entire estate was left to the ex-spouse with no substitute gift or residue clause → partial intestacy (the ex-spouse's share passes under intestacy rules — the children would usually inherit). Practical implication: always remake your will IMMEDIATELY after the final divorce order. Do not rely on s18A to sort things out — the automatic revocation may not give the outcome you want.
Intestacy and divorce — what changes?
On divorce (from the date of the final order), the former spouse loses ALL intestacy rights under the Administration of Estates Act 1925 (England and Wales). They are treated as having predeceased the deceased for intestacy purposes. This means: if you die intestate (without a will, or with an invalid will) after the final divorce order, your ex-spouse CANNOT inherit anything under the intestacy rules — even if they were the person you lived with or were closest to. The estate passes according to the statutory intestacy hierarchy: if you have children, the entire estate passes to your children (equally); if no children, to parents; if no parents, to siblings; etc. What does NOT change on divorce (for intestacy): step-children (children of the ex-spouse) lose all intestacy rights — step-children NEVER have intestacy rights under English law (Administration of Estates Act 1925) regardless of divorce; only biological, adopted, or legitimated children inherit on intestacy. This reinforces the need for a will, particularly in blended families where step-children must be specifically named. Scotland: the position differs under Scottish succession law; this article addresses England and Wales only.
Transferred NRB (tNRB) and divorce — what survives?
The transferred NRB (tNRB — s8A IHTA 1984) allows the executor of a surviving spouse to claim the unused NRB percentage from a deceased spouse. The key rule: the tNRB only arises if the deceased was your SPOUSE AT THE TIME OF THEIR DEATH. Two scenarios: (1) Spouse died while married to you: the unused NRB % transfers to you and you retain it even if you subsequently divorce and remarry. If you die years later (after a subsequent remarriage or even single), your executor claims the first deceased spouse's tNRB on your estate (using IHT402). Remarrying does not extinguish a prior tNRB — you can accumulate up to 100% additional NRB from multiple deceased spouses. (2) Both spouses alive at the divorce: no tNRB is created between ex-spouses. If ex-spouse A and ex-spouse B divorced while both were alive, and ex-spouse A later dies, no tNRB passes to ex-spouse B. Ex-spouse B is not a surviving spouse at A's death. Practical: executors of a person who had multiple marriages must check whether any prior spouse predeceased them while still married — each such prior deceased spouse may have left an unused NRB %. Claim each via IHT402. Maximum tNRB: 100% of current NRB (£325,000) — so maximum NRB available = £650,000 per person in 2026/27 (own NRB + 100% tNRB). Similarly for RNRB via IHT436.
CGT on divorce, pension nominations, and PETs made before divorce
CGT during divorce: Under s58 TCGA 1992, transfers between spouses and civil partners take place on a no-gain/no-loss basis (the acquiring spouse takes the asset at the transferring spouse's base cost — no CGT on the transfer). Finance Act 2023 (from 2023/24 onwards) extended this period for separating spouses: no-gain/no-loss applies until the date of the final order (not just the tax year of separation). Before the final order: all transfers between the divorcing parties are no-gain/no-loss for CGT — critical for transfers of the matrimonial home (would otherwise trigger CGT where main residence relief doesn't fully apply); investments and shares. After the final order: market value disposal rule (s17 TCGA — connected persons) applies for 3 years after separation or until the separation agreement/court order date. After that: open market value (arm's-length transfer). PPR (Private Residence Relief — s222 TCGA): the main home is usually fully covered by PPR if it was the main residence; gains outside PPR period trigger CGT at 24% (residential property). Court-ordered transfers after a final order: consider s222 TCGA (PPR) carefully and take CGT advice. Pension nominations on divorce: update immediately. DC pension death benefits are paid at the trustees' discretion, guided by the expression of wishes (nomination form). The nomination is not legally binding. If you do not update the nomination after divorce, the pension trustees may still pay to the ex-spouse — against your wishes. They will consider all relevant circumstances, but a stale nomination creates uncertainty and potential for the ex-spouse to receive the pension. Update nominations with ALL pension providers (personal, workplace, SIPP, DB death-in-service expression of wishes) immediately after divorce. PETs made to a spouse before divorce: if A gave B £200,000 while married (a PET — or actually an exempt gift under s18 IHTA), and A and B subsequently divorced, and A died within 7yr of the gift — the GIFT WAS ORIGINALLY EXEMPT UNDER S18 (inter-spouse transfer) and remains exempt: the s18 exemption applied at the TIME OF THE GIFT (when they were still married). A subsequent divorce does not revoke the exemption on a prior valid s18 transfer. Contrast: a PET made AFTER the divorce — to the ex-spouse as a non-spouse individual — is chargeable under the normal 7yr PET rules.
Frequently Asked Questions
Does divorce affect your will in the UK?
Yes — significantly. Under Wills Act 1837 s18A (England and Wales), on the grant of the final divorce order: (1) any gift to the former spouse in your will is automatically void (the former spouse is treated as having predeceased you for will purposes); and (2) any appointment of the former spouse as executor or trustee is also void. The REST of the will remains valid. However, this automatic protection may not produce the result you want: if your will says 'everything to my spouse, and if they predecease me, to [children]', the children inherit. But if your will just says 'everything to my spouse' with no alternative, the gift fails and the estate may fall into partial intestacy. The critical point: always remake your will IMMEDIATELY after the final divorce order — the automatic s18A revocation is a backstop, not a substitute for proper estate planning after divorce.
What happens to inheritance tax after divorce in the UK?
The unlimited spousal exemption (s18 IHTA 1984) ceases on the date of the final divorce order. Before the final order (even during legal separation): transfers between you and your spouse are still IHT-exempt under s18. After the final order: your ex-spouse is treated as a stranger for IHT purposes. Any gifts from you to your ex-spouse are PETs (s3A IHTA — 7yr clock; IHT at 40% if failed). Your ex-spouse cannot inherit from you under s18 IHTA. They also lose all intestacy rights. For IHT planning during divorce: transfer valuable assets BEFORE the final order is made, while the s18 exemption still applies. The maintenance and financial settlement awarded under a consent order is generally exempt from IHT under s11 IHTA 1984 (reasonable maintenance/financial provision for a former spouse or children).
Can my ex-spouse inherit my pension after divorce?
DC pension death benefits are paid at the trustees' discretion, guided by your nomination form (expression of wishes). The nomination is NOT legally binding. If you do not update your nomination after divorce, the pension trustees may take into account your stale nomination (naming your ex-spouse) alongside other circumstances. There is no law preventing them from paying to your ex-spouse — they have discretion. In practice, pension trustees usually take note of changed relationships, but a stale nomination creates uncertainty and risk. You should update all pension nominations (workplace pension, personal pension, SIPP, stakeholder pension) IMMEDIATELY after the final divorce order. Also update any death-in-service expression of wishes with your employer. If your ex-spouse was already named and you die before updating, the trustees may — or may not — still pay to your ex-spouse. Update promptly to avoid this.
Does the no-gain/no-loss CGT treatment apply during divorce?
Yes — Finance Act 2023 extended the CGT no-gain/no-loss treatment for separating spouses. Under s58 TCGA 1992, transfers between spouses/civil partners take place at the transferring spouse's base cost (no CGT on the transfer). From 2023/24, this treatment applies until the date of the FINAL DIVORCE ORDER — not just the tax year of separation as was previously the case. This means: if you and your spouse separated in early 2024/25 and the final order is granted in 2026/27, all asset transfers between you up to the final order date can be done at no gain/no loss. This is particularly important for the matrimonial home: if only one spouse has lived in it (and PPR does not fully cover the period), the no-gain/no-loss rule avoids triggering CGT on the transfer under the consent order. After the final order: market value disposal (s17 TCGA) applies to transfers between ex-spouses.
Can I still claim my late spouse's transferred NRB if we later divorced?
It depends on when your spouse died. If your spouse DIED WHILE YOU WERE STILL MARRIED (before the divorce): their unused NRB % is available as a transferred NRB (tNRB — s8A IHTA 1984) for your estate on your death. You retain this tNRB even if you subsequently divorce and remarry. A subsequent divorce does not extinguish a tNRB that arose before the divorce. If your spouse was ALIVE at the divorce: no tNRB was created between you as ex-spouses. If your ex-spouse later dies after the divorce, their unused NRB passes to whoever their surviving spouse is at the time of their death (if they remarried) — not to you. Summary: tNRB only arises where one spouse predeceased the other while still married. It is not affected by a later divorce of the surviving spouse. Your executors claim it on your death using HMRC form IHT402.
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