Inheritance Tax for married / civil partner couple

There are specific IHT rules that apply only to married couples and those in a civil partnership. In most cases, these rules will mean that there is no inheritance tax to pay, if you leave everything to your legal partner.

There are three main inheritance tax exemptions and allowances that affect spouses:

• Inheritance Tax Spouse Exemption
• Transferable Nil Rate Band
• Residence Nil Rate Band

Together, they can help a couple protect up to £1 million of assets against unnecessary inheritance tax

Under the IHT spouse exemption, married couples and civil partners living in the UK can pass all of their estate to their surviving partner, tax free. There is no upper or lower limit to the value of the estate. Any inheritance tax payable becomes due only on the death of the second partner. This exemption does not apply for couples who are simply living together, in a so-called common law relationship. For this reason, many long-term cohabitees might wish to consider marriage or forming a civil partnership, as part of their IHT planning.

When the second parent in a married couple or civil partnership passes away, their estate will be subject to inheritance tax if it exceeds the inheritance tax threshold of, including any available residence nil rate band.

In certain cases, the unused inheritance tax threshold of the first deceased spouse or civil partner can be transferred to the surviving spouse or civil partner, effectively increasing their threshold and potentially reducing the inheritance tax liability.

For tax advice, consult a qualified accountant.