IHT Spouse Exemption UK 2026: s18 IHTA Unlimited Inter-Spouse Gifts, Overseas Domicile Cap £325k, s267ZA Election, and Transferable NRB
Gifts between UK-domiciled spouses are completely IHT-exempt — no limit; no 7-year clock; no PET. But the exemption defers IHT to the second death. And if your spouse is not UK-domiciled: the cap of £325k applies unless you elect.
Cohabiting Couples Have NONE of These Benefits — Marriage Provides the Full s18 Exemption
The s18 IHTA spouse exemption applies only to legally married couples and registered civil partners. A cohabiting partner has NO spouse exemption — assets left to them on death are fully subject to IHT at 40% above the NRB. Additionally: no transferable NRB (tNRB); no tRNRB. For cohabiting couples with combined estates above £650k, the IHT bill on the first death can be very large. Marriage or civil partnership is the simplest IHT planning step available.
| Scenario | Exemption Amount | Cap | Planning Guidance |
|---|---|---|---|
| UK-domiciled spouse to UK-domiciled spouse — lifetime gifts | UNLIMITED — s18(1) IHTA 1984. No cap. No PET. No 7yr clock. The gift is IMMEDIATELY and COMPLETELY exempt from IHT. No limit on the number or size of gifts between UK-domiciled spouses. Applies to: cash; investments; property; business interests; any asset. Income tax and CGT still apply — the spouse exemption is an IHT exemption only. CGT: inter-spouse transfers are on a 'no-gain/no-loss' basis for CGT (s58 TCGA 1992) — the recipient spouse takes the asset at the transferor's base cost. No CGT on the transfer between spouses. Income tax: transfers of income-producing assets between spouses may shift the income to the other spouse — potentially efficient if one spouse has a lower marginal rate. SDLT: transfers of property between spouses are subject to SDLT if the property is mortgaged (the chargeable consideration is the mortgage assumed by the recipient). Unencumbered property transfers between spouses: no SDLT. | None. The full s18 exemption applies without limit to all inter-spouse transfers (lifetime or on death) where both spouses are UK-domiciled. | For IHT equalisation: if one spouse has a larger estate than the other, lifetime gifts between spouses can equalise the estates — ensuring each spouse has assets equal to the combined NRB (£325k × 2 = £650k, or with RNRBs up to £1m) before death. This reduces the combined IHT burden on both deaths. Example: Spouse A has £900k assets; Spouse B has £100k. If A gifts B £400k: both have £500k. On each death: NRB + RNRB (£500k each) shelters the full estate — no IHT (assuming home passes to children). Without equalisation: on A's death, £900k − £500k NRB/RNRB = £400k at 40% = £160k IHT (plus B's estate is only £100k). |
| UK-domiciled to NON-UK-domiciled spouse — overseas domicile cap | CAPPED at £325,000 — s18(2) IHTA 1984. If the RECIPIENT spouse is NOT UK-domiciled (domicile of origin or choice is a non-UK country; and NOT an LTUK — i.e., not resident in the UK for 10 of the last 20 years): the spouse exemption is limited to £325,000 per transfer. Any amount above £325k transferred to the non-UK-domiciled spouse is CHARGEABLE: (a) on death: 40% IHT on the excess above the NRB (taking into account other chargeable transfers); (b) lifetime gifts: the excess above £325k is a chargeable transfer (CLT if to a trust; PET if directly to the non-dom spouse? — actually: gifts to individuals are PETs under s3A; but the £325k restriction applies to the exemption — the excess is a PET which becomes exempt after 7yr). HMRC: the cap is a restriction on the exemption, not a separate NRB. The cap amount (currently £325k) is set by Treasury order and is the same as the NRB. | £325,000 — set at the same level as the NRB (Finance Act 1986 s102 — now s18(2) IHTA). If NRB rises: the cap rises with it (to the new NRB value). If NRB is frozen (as at present — frozen until at least April 2028): the cap remains £325k. | If the recipient spouse is non-UK domiciled (and not LTUK): plan around the £325k cap. Options: (1) make the election under s267ZA IHTA (see row 3 below) — non-UK-dom elects to be treated as UK-dom; full unlimited exemption applies; but worldwide assets enter IHT scope. (2) Leave the non-UK-dom spouse only up to £325k via the spouse exemption; leave the balance to children (using the NRB + RNRB on the first death). (3) Equalise assets DURING LIFETIME (while both spouses are alive) — use inter-vivos transfers to move UK assets to the UK-dom spouse, non-UK assets to the non-UK-dom spouse; plan around the cap for the UK-dom spouse's estate. (4) Consider whether the non-UK-dom spouse will become LTUK before the UK-dom spouse dies — if the non-UK-dom is on track to become LTUK (10yr UK residence approaching), the unlimited exemption will apply automatically without the need for an election. |
| The s267ZA election — non-UK-dom spouse elects to be treated as UK-domiciled | Effect of the election: the non-UK-domiciled spouse is treated as UK-domiciled for ALL IHT purposes (s267ZA IHTA 1984 — introduced by FA 2013; modified by the FA 2025 LTUK changes). The unlimited s18 spouse exemption applies — no £325k cap. The election must be made by the non-UK-dom spouse (the recipient). It can be made during life or within 2yr of the UK-dom spouse's death (retrospective election). IRREVOCABLE: once made, the election cannot be withdrawn while the electing spouse remains in force as a treated-UK-dom (the election lapses if the electing spouse ceases to be a UK resident for a specified period — 4 consecutive tax years). WORLDWIDE ASSET EXPOSURE: after the election: the non-UK-dom spouse's WORLDWIDE assets (including overseas property, investments, bank accounts) are within the scope of UK IHT. This is the major trade-off of the election. FA 2025 LTUK interaction: the LTUK test (10 of last 20yr resident) automatically brings non-doms into UK IHT on all worldwide assets. The s267ZA election is an additional/earlier route for those who want the unlimited spouse exemption before reaching the LTUK threshold. | No cap after election — unlimited s18 exemption applies as if the electing spouse were UK-domiciled. | When to elect: (1) the non-UK-dom spouse has FEW or NO significant overseas assets (so the worldwide IHT exposure is not a concern — their estate is primarily UK assets that would be in the UK IHT net anyway); (2) the UK-dom spouse is terminally ill and the estate is large — waiting risks the UK-dom spouse dying before the election can be made. Election on death: can be made within 2yr of the UK-dom spouse's death — the personal representative or the surviving non-UK-dom spouse makes the election; the unlimited exemption applies retrospectively. When NOT to elect: the non-UK-dom spouse has large overseas assets (holiday home abroad; foreign investments; overseas family company) that are currently EXCLUDED PROPERTY for UK IHT — making the election would expose these to 40% UK IHT. Seek specialist international IHT advice before making the s267ZA election. |
| Spouse exemption on death — leaving everything to the survivor and the transferable NRB | On death: if the deceased leaves EVERYTHING to the surviving UK-domiciled spouse: the entire estate is exempt under s18 IHTA. IHT on the first death = £0 regardless of the estate size. However: the spouse exemption on the first death DEFERS IHT to the second death. The surviving spouse's estate includes their own assets PLUS everything inherited. On the second death: the combined estate is subject to IHT. TRANSFERABLE NRB (s8A IHTA 1984): when the first spouse leaves everything to the survivor: the first spouse's NRB is UNUSED (because the spouse exemption meant no IHT was charged — the NRB was not needed). The UNUSED NRB is transferred to the surviving spouse: on the survivor's death, they have their own NRB (£325k) PLUS the transferred NRB (£325k) = combined £650k NRB. If the first spouse also had an unused RNRB: the tRNRB (transferable Residence NRB — s8G IHTA) is also transferred — potentially up to an additional £350k = total £1m combined. | Unlimited for UK-domiciled couple. The tNRB and tRNRB are both transferred automatically — no need for an election; the executors of the first estate must claim the transfer on the SECOND death (HMRC Form IHT402). Only one tNRB and one tRNRB can be claimed (you cannot accumulate multiple transferred NRBs from multiple deceased spouses — capped at 100% transfer each). | The 'all to spouse then all to children' will structure: the most common simple will. First death: everything to surviving spouse (spouse exemption); no IHT. Second death: combined NRB of up to £650k (two NRBs) + RNRB + tRNRB of up to £350k = up to £1m total before IHT (if a home passes to direct descendants). This structure works well for estates under £1m. For estates above £1m: the NRB/RNRB is insufficient; consider: lifetime gifting; charitable legacies (s36 IHTA 36% rate); trusts; BPR/APR assets. Equalisation on first death: for very large estates, consider NOT leaving everything to the surviving spouse — use the first death's NRB to fund an NRB trust (reduces the second death estate). Compare the NRB trust vs the tNRB transfer route (see iht-deed-of-variation-iht-uk for analysis). |
| Civil partners — same as spouses under s18 IHTA | CIVIL PARTNERS have IDENTICAL IHT treatment to married spouses under s18 IHTA 1984 (as amended by the Civil Partnership Act 2004 — Sch 21 inserted CP references throughout IHTA). The s18 exemption applies equally to civil partners — unlimited; immediate; no PET; no 7yr clock. The transferable NRB (s8A IHTA) and tRNRB (s8G IHTA) apply equally to surviving civil partners. The overseas domicile cap (s18(2)) and the s267ZA election apply equally to non-UK-domiciled civil partners. COHABITANTS (non-married, non-CP couples): the s18 IHT exemption does NOT apply to cohabitants — gifts between unmarried couples are PETs (7yr clock) or CLTs. On death: assets left to a cohabiting partner are chargeable to IHT (no exemption). Cohabitants have NONE of the IHT benefits of married couples or civil partners. Marriage or civil partnership provides significant IHT advantages — this is the primary estate planning reason to formalise a long-term relationship. | None for civil partners with UK domicile — same as spouses. £325k cap for non-UK-domiciled civil partner (same as spouses). s267ZA election available equally. | Cohabitants: no s18 exemption; no tNRB; no tRNRB. For long-term cohabiting couples: the IHT bill on the first death can be significant. Options: (1) marry or register a civil partnership (eliminates the IHT disparity); (2) maximise lifetime gifting (PETs — s3A IHTA — 7yr clock) from the wealthier partner to the less wealthy partner to reduce the estate before death; (3) use the annual exemption and normal income exemption to transfer assets; (4) write a will leaving the estate to the cohabiting partner — there is no IHT exemption but at least the assets pass as intended (intestacy does not protect cohabitants). The will is the first step — without one, a cohabiting partner has NO RIGHT to inherit under intestacy. |
IHT spouse exemption UK 2026. s18 IHTA 1984: s18(1) — a transfer of value is an exempt transfer to the extent that the value transferred is attributable to property which becomes comprised in the estate of the spouse or civil partner of the transferor, or, so far as the value transferred is not so attributable, to the extent that that estate is increased. s18(2) — where the transferor is domiciled in the United Kingdom at the time of the transfer and the transferor's spouse or civil partner is not so domiciled at that time: s18(1) only applies to transfers not exceeding a limit of £325,000 (to be revised by Treasury order — currently the same value as the NRB). Finance Act 2013 s176 and Sch 45: introduced the deemed domicile election for non-UK domiciled spouses — now s267ZA IHTA 1984. FA 2025 changes: the LTUK (Long-Term UK Resident) test replaced the former domicile test for most IHT purposes from 6 April 2025. LTUK: an individual is a Long-Term UK Resident if they have been UK resident for at least 10 of the previous 20 UK tax years. LTUK individuals are treated as UK-domiciled for IHT purposes on all worldwide assets. s267ZA IHTA election: available to non-UK domiciled spouses and civil partners; the election must be made by the spouse/CP who is not UK-domiciled; once in force, treats the elector as UK-domiciled for ALL IHT purposes (not just the spouse exemption); the election lapses if the elector is non-UK resident for 4 consecutive UK tax years following the election (in that case, the non-UK-dom status is restored after a further period — complex specialist advice required). The election can be made during life or within 2yr of the death of the UK-domiciled spouse (allowing a retroactive election to claim the full unlimited exemption on the first spouse's estate — this is very valuable if the UK-dom spouse has died with a large estate). Transferable NRB (s8A IHTA 1984): s8A(1) — where the deceased's estate on death includes no 'chargeable amount' (or the chargeable amount is less than the NRB): a proportion of the NRB is available to be transferred to the surviving spouse; s8A(3): the proportion transferred = (unused NRB / NRB at date of first death); applied to the NRB at the date of the SECOND death. Example: first death NRB = £325k; unused NRB = £325k (100%); on survivor's death NRB = £325k; transferred NRB = 100% × £325k = £325k; combined = £650k. IMPORTANT: only 100% of one NRB can be transferred — if a spouse had been previously widowed, they may have received a tNRB from a prior spouse, but the maximum combined NRB for any one person is 200% of the NRB in force at death. tNRB CLAIM: executors of the survivor's estate claim the tNRB on HMRC Form IHT402. Evidence required: the IHT account (IHT400 or IHT205) for the first spouse's death; or a statutory declaration from the executors confirming the unused NRB. Residence NRB (RNRB — s8D IHTA 1984): additional NRB of up to £175k if a residence passes to direct descendants (lineal descendants); tRNRB (s8G IHTA): the unused RNRB of the first spouse is transferred on the second death. Maximum tRNRB = 100% of the RNRB at the second death (£175k) — if unused by the first spouse. Total possible: NRB (£325k) + tNRB (£325k) + RNRB (£175k) + tRNRB (£175k) = £1,000,000 maximum before IHT for a UK-domiciled couple with a qualifying residence. Cohabitants: the Administration of Estates Act 1925 gives no rights to a cohabitant under intestacy (England and Wales). A will is essential for cohabitants. Even with a will: no s18 spouse exemption applies; no tNRB; no tRNRB. Gifts between cohabitants during life: PETs (s3A IHTA) — 7yr clock; taper from year 3. Gifts to a cohabiting partner in a will: chargeable to IHT at 40% on the excess above the NRB of the deceased's estate (after other deductions). Inter-spouse CGT (s58 TCGA 1992): s58(1) — spouses/civil partners are treated as if a transfer between them were at no gain/no loss; the recipient takes the asset at the transferor's base cost; no CGT on the transfer itself. The gain is deferred — the recipient pays CGT on the original gain when they dispose of the asset in the future (using the original base cost). SDLT on property transfers between spouses: if the property is MORTGAGED and the recipient assumes (takes over) the mortgage: the mortgage amount is the chargeable consideration for SDLT. On unencumbered (no mortgage) property: no SDLT on inter-spouse transfers (no chargeable consideration).
Frequently Asked Questions
Is there IHT on gifts between spouses in the UK?
No — gifts between UK-domiciled spouses (or civil partners) are completely exempt from IHT under s18 IHTA 1984. The exemption is unlimited: there is no cap on the amount, no PET or CLT is made, and there is no 7-year clock. The exemption applies to both LIFETIME GIFTS (inter-vivos transfers) and TRANSFERS ON DEATH (leaving assets to the surviving spouse in the will). If both spouses are UK-domiciled: there is no IHT on any transfer between them, regardless of the amount. Note: this is an IHT exemption only — income tax and CGT may still apply to transfers of income-producing assets or assets with gains (though CGT between spouses is on a no-gain/no-loss basis). The spouse exemption DEFERS IHT to the second death — the surviving spouse's estate (including everything inherited) is assessed for IHT when they die.
Is there a limit on the IHT spouse exemption if my spouse is not UK domiciled?
Yes — s18(2) IHTA 1984: if the RECIPIENT spouse is NOT UK-domiciled (their domicile of origin or choice is a non-UK country, and they are not a Long-Term UK Resident — LTUK — i.e., not resident in the UK for 10 of the last 20 years), the spouse exemption is CAPPED at £325,000 (currently — set equal to the NRB). Any amount above £325k transferred to the non-UK-domiciled spouse is chargeable to IHT. Option: the non-UK-dom spouse can make a s267ZA IHTA election to be treated as UK-domiciled — the full unlimited exemption then applies. Downside of the election: the electing spouse's WORLDWIDE assets are then within the scope of UK IHT. If they have significant overseas assets, this may increase their own IHT exposure. Seek specialist international IHT advice before making the election.
Can I leave my entire estate to my spouse to avoid IHT?
Yes — if both you and your spouse are UK-domiciled, leaving your entire estate to your surviving spouse results in ZERO IHT on the first death (s18 IHTA 1984). However, this DEFERS the IHT to the second death: the surviving spouse now has their own estate plus everything inherited — the full combined estate is assessed for IHT when they die. The benefit of this strategy: the transferable NRB (s8A IHTA). When the first spouse leaves everything to the survivor, the first spouse's NRB (£325k) is unused — it is transferred to the surviving spouse. On the survivor's death, they have two NRBs (£650k) plus potentially two RNRBs (£350k) = up to £1m combined before IHT applies (if a home passes to direct descendants). For estates under £1m: this is an efficient structure. For larger estates: additional planning (lifetime gifting; trusts; charitable legacies) is needed.
What is the transferable nil-rate band and how does it work with the spouse exemption?
The transferable nil-rate band (tNRB — s8A IHTA 1984): when a spouse dies and their estate passes to the surviving spouse under the s18 spouse exemption (no IHT on the first death), the first spouse's NRB (£325k) was NOT used (because the spouse exemption meant no IHT was charged). That UNUSED NRB is transferred to the surviving spouse. On the surviving spouse's death: they have their own NRB (£325k) PLUS the transferred NRB (£325k) = combined £650k NRB. The tNRB is claimed by the executors of the SECOND estate on HMRC Form IHT402 (they submit evidence that the first spouse's NRB was unused — the first spouse's IHT account or IHT205). Similarly: the Residence NRB (s8D IHTA — £175k each) can be transferred as a tRNRB (s8G IHTA). Combined NRB + RNRB + tNRB + tRNRB = up to £1m for a couple with a home passing to direct descendants. This is the key IHT benefit of marriage/civil partnership over cohabitation — cohabitants have no tNRB and no tRNRB.
Does the IHT spouse exemption apply to cohabiting couples?
No — the s18 IHTA spouse exemption applies ONLY to legally married spouses and registered civil partners. Cohabiting couples (unmarried partners, regardless of how long they have lived together) have NO spouse exemption. Consequences: (1) lifetime gifts between cohabiting partners are PETs (7yr clock — s3A IHTA) or CLTs; (2) assets left to a cohabiting partner on death are FULLY SUBJECT TO IHT at 40% (above the NRB); (3) no transferable NRB; no transferable RNRB. For cohabiting couples with combined estates above £650k (or £1m if a home with children): the IHT bill on the first death can be substantial. Solutions: (1) marry or register a civil partnership — the simplest way to get the full s18 spouse exemption; (2) lifetime equalisation of assets (PETs); (3) will planning (essential — intestacy gives cohabitants NOTHING; the cohabiting partner must be named in the will). The will is the absolute minimum for any cohabiting couple with assets.
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