IHT Planning for Married Couples and Civil Partners: The £1 Million Threshold
Married couples and civil partners can pass up to £1 million free of Inheritance Tax by combining two Nil Rate Bands (£325,000 each) and two Residence Nil Rate Bands (£175,000 each), where a qualifying home passes to direct descendants. Unused allowances from the first death transfer automatically to the survivor. This guide explains the key strategies — and the planning pitfalls to avoid.
IHT Allowances for Married Couples (2026/27)
| Allowance | Amount | Conditions |
|---|---|---|
| Nil Rate Band (NRB) — each spouse | £325,000 | Always available; transferable from first death |
| Residence Nil Rate Band (RNRB) — each spouse | £175,000 | Home must pass to direct descendants; tapers above £2m estate |
| Total per person (NRB + RNRB) | £500,000 | Both allowances available |
| Total for couple (both NRBs + both RNRBs) | £1,000,000 | Home passes to children; estate under £2m threshold |
| Spousal exemption — lifetime gifts | Unlimited | UK-domiciled/LTR spouse; no 7-year wait needed |
| Spousal exemption — death gifts | Unlimited | Passes to surviving UK-domiciled/LTR spouse |
Key IHT Strategies for Couples
1. Unlimited spousal exemption
Under IHTA 1984 s18, all transfers between spouses and civil partners are exempt from IHT — both lifetime gifts and legacies on death. There is no 7-year wait. There is no limit. This allows a married couple to defer all IHT to the second death by leaving everything to each other first.
2. Transferable NRB and RNRB
Where the first spouse uses their unlimited spousal exemption (leaving everything to the survivor), their NRB and RNRB are both unused. These unused allowances transfer to the surviving spouse. The executor must claim them on the second death by submitting HMRC IHT402 (transferred NRB) and IHT435 (transferred RNRB). They are not automatic — an executor who fails to claim them misses up to £500,000 of allowances.
3. Mirror wills
Mirror wills — each spouse leaving everything to the other, then equally to children — achieve the ‘simple’ approach: full deferral to second death using the spousal exemption, then combined allowances (up to £1m) on second death. They are the most common and straightforward IHT strategy for a standard married couple with children. WillSafe UK's Mirror Wills Kit (£59.99) is designed precisely for this structure.
4. Joint tenancy and tenants in common
A property owned as beneficial joint tenants passes automatically to the surviving owner by right of survivorship — outside the will entirely. This works efficiently for married couples (the survivor gets the whole property). However, changing to tenants in common (each holding a defined share) allows each spouse to direct their share by will to a trust or to children, which can preserve the NRB and reduce the surviving spouse's taxable estate.
Frequently Asked Questions
What IHT advantages do married couples and civil partners have that unmarried couples do not?
The IHT advantages of marriage or civil partnership are substantial: (1) UNLIMITED SPOUSAL EXEMPTION (IHTA 1984 s18): all transfers between spouses and civil partners — both during lifetime and on death — are completely exempt from IHT. An unmarried partner receives no automatic exemption and is treated as a stranger for IHT purposes. (2) TRANSFERABLE NIL RATE BAND (s8A IHTA 1984): where the first spouse to die does not use all of their NRB (£325,000), the unused percentage transfers to the surviving spouse on second death. A couple where the first spouse leaves everything to the survivor can therefore use two full NRBs on the second death (£650,000 combined). This was introduced by the Finance Act 2008, retrospectively back to 1972. (3) TRANSFERABLE RNRB (s8M IHTA 1984): the same transferable concept applies to the Residence Nil Rate Band. Where the first spouse's RNRB was unused, the survivor can use up to twice the RNRB on second death (£350,000 total in 2026/27). (4) Combined IHT-free threshold of £1 million for a couple passing a home to direct descendants (where neither NRB nor RNRB was used on first death and the estate is under £2m). None of these benefits are available to unmarried cohabiting partners.
How does the transferable nil rate band work in practice?
When the first spouse dies, any unused portion of their NRB (£325,000 in 2026/27) is recorded as a percentage. If the first spouse left everything to the surviving spouse (using the unlimited spousal exemption), their NRB was completely unused — 100% of it is available to transfer. On the second death, the executor claims the transferred NRB by completing HMRC form IHT402. The transferred NRB is calculated as a percentage of the NRB at the time of the second death. Example: first spouse died in 2005/06 when the NRB was £263,000. They left everything to the surviving spouse — 100% of the 2005/06 NRB is unused. When the surviving spouse dies in 2026/27 with the NRB at £325,000, the transferred percentage (100%) applies to the current NRB: 100% × £325,000 = £325,000 additional NRB. Total NRB on second death: £325,000 + £325,000 = £650,000. There is no limit on how many transferred NRBs can be claimed from successive spouses — but the maximum is two NRBs in total (the survivor's own NRB plus one transferred NRB), regardless of how many previous spouses there were.
What is estate equalisation and why does it matter for IHT planning?
Estate equalisation is the strategy of balancing the value of assets between two spouses so that neither estate is disproportionately large. Without equalisation, a couple's total IHT can be higher than necessary. Example without equalisation: Spouse A has assets of £800,000 and Spouse B has assets of £200,000. On Spouse B's death (first to die), there is no IHT (estate under £325,000 NRB). All assets pass to Spouse A. Spouse A now has a £1,000,000 estate. On Spouse A's death, the combined NRB is £650,000 (own NRB + transferred NRB from Spouse B where RNRB does not apply). IHT: 40% × (£1,000,000 - £650,000) = £140,000. Example with equalisation: Each spouse holds £500,000. On first death: estate £500,000 less NRB £325,000 = £175,000 taxable. IHT: £70,000. The remaining estate (£430,000 after IHT) passes to the survivor who now has £930,000. On second death, only one NRB remains (the first was used), so the taxable estate is £930,000 - £325,000 = £605,000. IHT: £242,000. Total IHT: £312,000 — worse than the unequalised case. The lesson: equalisation is not always better. The optimal strategy depends on the total estate value, the order of deaths, and whether the RNRB applies. Professional advice helps model both scenarios.
What is a nil rate band discretionary trust and is it still useful for married couples?
A nil rate band discretionary trust (NRBDT) in a will directs an amount equal to the nil rate band into a discretionary trust on first death, rather than leaving everything to the surviving spouse. The trust assets are outside the surviving spouse's estate. Before the transferable NRB was introduced in 2008, NRBDTs were the main way to ensure both spouses used their NRBs. Today, with transferable NRB, NRBDTs are less essential for their original purpose — but they remain useful in certain situations: (1) Protecting assets from the surviving spouse's care fees assessment (assets held in trust are not owned by the survivor). (2) Asset protection from the survivor's future creditors or new relationships. (3) Estates where the surviving spouse's estate is above the RNRB taper threshold — holding assets in trust on first death reduces the survivor's estate for RNRB taper purposes. (4) Where one spouse has outstanding debt or bankruptcy risk — assets in trust are not available to their creditors. NRBDTs require careful drafting to avoid the loan arrangement or related property pitfalls that HMRC has challenged. A loan-based NRBT (where the trust holds a debt owed by the surviving spouse) keeps assets accessible to the survivor while outside their estate.
Does the IHT spousal exemption apply to a non-domiciled or overseas spouse?
The unlimited spousal exemption under IHTA 1984 s18 applies in full where both spouses are UK-domiciled (or long-term UK residents from April 2025). Where the recipient spouse is non-domiciled (not a long-term UK resident), the exemption is limited — the transfer is only exempt up to the current NRB (£325,000 in 2026/27). Transfers above £325,000 to a non-domiciled spouse are chargeable to IHT at 40%. However, a non-domiciled spouse can elect to be treated as UK-domiciled for IHT purposes (IHTA 1984 s267ZA). This election restores the unlimited spousal exemption but also makes the non-domiciled spouse's worldwide assets subject to IHT. The election is irrevocable during the elector's lifetime (subject to a later revocation right if the individual becomes non-UK resident and non-LTR for sufficient years). The trade-off — unlimited exemption vs worldwide IHT exposure — requires careful consideration. From April 2025, the LTR rules replace domicile as the IHT test: a non-domiciled spouse who has been UK resident for fewer than 10 of the preceding 20 years is treated the same as the old non-dom position (limited exemption); one who has been UK resident for 10+ years is a long-term resident and receives the unlimited exemption.
What will planning steps should married couples take to maximise the £1 million IHT-free threshold?
The key will planning steps for married couples aiming to use the full £1 million combined threshold are: (1) BOTH SPOUSES MUST HAVE WILLS — intestacy rules do not guarantee the optimal outcome, and an outdated will can waste allowances. (2) INCLUDE A CLAUSE DIRECTING THE RESIDENCE TO DIRECT DESCENDANTS — the RNRB (up to £175,000 per person) applies only where a qualifying residential interest passes to direct descendants (children, grandchildren, stepchildren). If the home passes directly to the surviving spouse and then to children on second death, the first RNRB is unused but can be transferred (100% unused = £175,000 extra RNRB on second death). (3) CLAIM THE TRANSFERRED NRB AND RNRB on the second death — the executor must actively claim them on IHT402 (transferred NRB) and IHT435 (transferred RNRB). They are not automatic. (4) CHECK THE RNRB TAPER POSITION — if the estate on second death may exceed £2 million, the RNRB begins to taper. Consider whether lifetime gifts or other measures can bring the estate below £2m. (5) REVIEW WILLS EVERY 3–5 YEARS — asset values change, children are born or die, circumstances alter. The will that was optimal in 2015 may not be optimal in 2026. (6) CONSIDER A MIRROR WILL or MUTUAL ARRANGEMENT — mirror wills (each leaving everything to the other, then to children) achieve the simple 'everything to spouse first' structure that fully defers IHT to the second death while both NRBs and RNRBs carry over.
Get Your Mirror Wills in Place
Mirror wills are the foundation of IHT planning for most married couples. WillSafe UK's Mirror Wills Kit gives you two professionally drafted, legally valid wills — one for each of you — for £59.99.