Inheritance Tax Spouse Exemption UK (2026): Unlimited Relief, Non-Dom Cap & Transferable Nil-Rate Band

No — assets left to a UK-domiciled spouse or civil partner are completely exempt from inheritance tax (IHT), regardless of the amount. This is the spousal exemption under the Inheritance Tax Act 1984, s18. The exemption is unlimited: a £10 million estate left entirely to a UK-domiciled spouse pays zero IHT on the first death. There is one important exception: if the surviving spouse is not domiciled in the UK, the exemption is capped at £325,000 (the nil-rate band). The exemption applies automatically — executors do not need to claim it. It applies to both legally married spouses and registered civil partners; it does not apply to cohabiting partners.

If the surviving spouse is not domiciled in the UK (i.e. their permanent home — their domicile of choice or origin — is in another country), the spouse exemption is capped at £325,000 (the standard nil-rate band). Assets above £325,000 left to a non-dom spouse are taxed at 40% in the normal way. However, a non-domiciled spouse can make an irrevocable election to be treated as UK-domiciled for IHT purposes — this removes the cap and restores the unlimited exemption. The election must be made within two years of the date of death (or within such extended time as HMRC allows). Couples with significant assets where one partner is non-dom should take specialist advice well before death.

When a spouse dies and leaves everything to the surviving spouse (using the unlimited spouse exemption), their nil-rate band (£325,000) is unused. This unused nil-rate band can be transferred to the surviving spouse's estate. On the survivor's death, the executors can claim up to 100% of the deceased spouse's unused NRB — potentially doubling the combined nil-rate band to £650,000. The transfer is not automatic: executors must claim it on form IHT402 when the survivor dies. Multiple transferred NRBs can be claimed (e.g., if someone was widowed twice), but the total NRB cannot exceed 100% of the current threshold (i.e., £325,000 maximum transfer regardless of past bands). The transferable NRB applies to deaths from 9 October 2007 onwards.

Yes. The residence nil-rate band (RNRB — currently £175,000 per person in 2026/27, frozen to April 2031) also transfers between spouses in the same way as the standard NRB. If the first spouse to die leaves their estate to the surviving spouse without using the RNRB, the unused RNRB transfers and can be claimed on the survivor's death — provided the survivor leaves a qualifying residential property to direct descendants. This gives a combined potential tax-free threshold of up to £1,000,000 for a married couple on the second death (£325,000 × 2 NRB + £175,000 × 2 RNRB), provided the estate does not exceed the £2,000,000 taper threshold. Executors must claim the transferred RNRB on form IHT435.

Yes — the spouse exemption applies equally to registered civil partners under the Civil Partnership Act 2004. It does not apply to cohabiting partners, regardless of how long they have lived together or whether they have children together. For cohabiting couples, the only way to pass assets IHT-free to a partner is through the nil-rate band (£325,000) or by leaving assets to charity. Cohabiting partners also face inheritance tax at 40% on anything above the threshold, cannot claim the transferable NRB, and cannot benefit from the RNRB transfer. This is the single most significant financial reason for cohabiting couples to either marry, enter a civil partnership, or take specialist estate planning advice.

The unlimited spouse IHT exemption does not apply in four situations: (1) the receiving spouse is not UK-domiciled — the cap is £325,000; (2) the couple are not legally married or in a registered civil partnership — cohabiting partners have no exemption; (3) assets pass to an ex-spouse after a Final Order (Decree Absolute) — divorce ends the exemption; (4) the gift is a conditional gift that the spouse might not receive (in which case HMRC may treat it as not passing to the spouse for exemption purposes). Separation alone does not end the exemption — a separated but not yet divorced spouse retains full IHT exemption rights.

Not always. Leaving everything to your spouse uses the unlimited exemption on the first death — but it does not save IHT overall, it merely defers it. On the second death, the full combined estate (potentially including the transferred NRB of £650,000 and transferred RNRB of £350,000) is taxed. For most couples, leaving everything to the surviving spouse is the right first step — it is simple, tax-deferred, and the transferred NRB/RNRB on the second death provides adequate planning. However, for estates over £2,000,000, where the RNRB tapers away, or for blended families, more sophisticated planning (life interest trusts, direct gifts to children, charitable legacies) may produce a better overall outcome. Always review your will and estate plan when assets significantly change.