Key facts
- Transfers between UK-domiciled spouses or civil partners are fully exempt from IHT.
- The exemption is unlimited — there is no cap on the amount that can be transferred.
- It applies to lifetime gifts and transfers on death.
- If the receiving spouse is non-UK-domiciled, the exemption is capped at £325,000 (unless they elect UK domicile).
- Any unused nil-rate band from the first spouse can be transferred to the survivor’s estate.
How the Spouse Exemption Works
The spouse and civil partner exemption is the single most important IHT exemption. It provides that transfers between legally married spouses or registered civil partners are completely exempt from IHT, with no limit on the amount. This applies to both lifetime gifts and transfers on death.[1]
This means that when the first spouse dies, their entire estate can pass to the surviving spouse without any IHT being charged, regardless of value.
Who Qualifies?
- Married couples — legally married under UK or foreign law
- Registered civil partners — under the Civil Partnership Act 2004
The following do not qualify:[2]
- Cohabiting (unmarried) partners
- Engaged couples who have not yet married
- Divorced or separated couples (once a decree absolute is issued)
- Separated couples who have not divorced (they may still qualify if still legally married)
Important for unmarried couples: Without the spouse exemption, any inheritance passing to an unmarried partner is subject to IHT above the nil-rate band. There is no equivalent exemption for cohabiting partners, regardless of the length of the relationship.
Deferral, Not Avoidance
The spouse exemption defers IHT to the second death — it does not eliminate it. When the surviving spouse dies, their estate (including the assets inherited from the first spouse) will be subject to IHT in the usual way.[1]
However, two mechanisms help reduce the eventual bill:
- Transferable nil-rate band (TNRB): Any NRB unused on the first death can be claimed on the second death, effectively doubling the threshold to £650,000
- Transferable RNRB: Similarly, any unused residence nil-rate band can be transferred, potentially giving a combined threshold of £1,000,000
Non-UK-Domiciled Spouse
If the receiving spouse is non-UK-domiciled, the exemption is limited to £325,000 (the same as the nil-rate band). This is known as the “non-dom spouse limit”.[2]
Options for couples where one spouse is non-domiciled:
- Election for UK domicile: The non-domiciled spouse can make an irrevocable election to be treated as UK-domiciled for IHT purposes, removing the £325,000 cap
- This election brings worldwide assets into scope: The trade-off is that the non-domiciled spouse’s worldwide estate becomes subject to UK IHT on their own death
Planning Considerations
| Strategy | Pros | Cons |
|---|---|---|
| Leave everything to spouse | Simple; no IHT on first death; TNRB available | IHT deferred but not reduced; large estate on second death |
| Leave NRB amount to children, rest to spouse | Uses NRB on first death; reduces surviving spouse’s estate | More complex will; children receive assets immediately |
| NRB discretionary trust, rest to spouse | Uses NRB; protects assets; flexibility | Trust administration costs; complexity |
| Rely on TNRB entirely | Maximum simplicity; surviving spouse has full access to all assets | Relies on NRB not being used by lifetime gifts; no asset protection |
Frequently Asked Questions
Does the spouse exemption apply to unmarried partners?
No. The spouse exemption only applies to legally married couples and registered civil partners. Cohabiting partners — no matter how long they have lived together — do not qualify. This is one of the most significant IHT disadvantages of not being married.
Should I leave everything to my spouse to avoid IHT?
Leaving everything to a surviving spouse defers IHT but does not avoid it. The assets will be in the survivor’s estate and potentially taxable on the second death. However, the transferable nil-rate band means any unused NRB from the first death can be claimed on the second death. Many couples rely on this approach for simplicity.
What if my spouse is not UK-domiciled?
If your spouse is non-UK-domiciled, the IHT exemption for transfers to them is limited to £325,000. However, the non-domiciled spouse can make an irrevocable election to be treated as UK-domiciled for IHT purposes, which removes the cap.
Further Reading
- The Nil-Rate Band (£325,000) — the IHT-free threshold
- Transferable Nil-Rate Band — claiming unused NRB from a deceased spouse
- Will Planning and IHT — structuring your will for maximum tax efficiency
- IHT Planning Basics — broader strategies to reduce IHT
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