Married Couples and IHT: How to Pass on Up to £1 Million Tax-Free

The oft-quoted ‘married couples can leave £1 million tax-free’ isn’t automatic - it depends on both spouses’ allowances actually being available and transferable, and a home genuinely passing to direct descendants. Here’s how it actually works.

The building blocks

• Each spouse has a £325,000 nil-rate band (NRB).
• Each spouse also has a £175,000 residence nil-rate band (RNRB), available if a qualifying home passes to direct descendants.
• Transfers between spouses are exempt from IHT entirely, regardless of value.
• Any unused NRB and RNRB transfers to the surviving spouse on the first death.

How this adds up to £1 million

When the first spouse dies leaving everything to the surviving spouse (using the spousal exemption), none of their NRB or RNRB is used - both allowances transfer in full to the survivor. When the surviving spouse later dies, they then have two full NRBs (£650,000) and two full RNRBs (£350,000) available, provided a qualifying home passes to direct descendants at that point - a combined £1 million tax-free.

Why this doesn’t happen automatically

• The surviving spouse’s estate must include a qualifying home passing to direct descendants at the second death - if the home has been sold, given away, or is left to someone other than a direct descendant, the RNRB portion is lost.
• The transfer must be formally claimed by the executor of the second estate, using the correct HMRC forms, referencing the unused allowances from the first spouse’s estate - this doesn’t happen without the right paperwork being submitted.
• The £2 million estate taper still applies to the survivor’s combined RNRB (see our dedicated RNRB article) - a large enough combined estate can still lose some or all of the residence allowance.

What if the first spouse didn’t leave everything to their partner?

If the first spouse used some of their own NRB or RNRB - for example, by leaving a portion of the estate directly to children rather than entirely to their spouse - only the unused percentage transfers, not necessarily the full amount. This is calculated proportionally and can result in less than the full £1 million being available at the second death, depending on how the first estate was actually structured.

Why wills should be reviewed with this specifically in mind

Some older wills, particularly those written before the RNRB was introduced in 2017, use trust structures designed around the old rules that can inadvertently prevent the transferable allowances from working as intended. A will review specifically checking that both the NRB and RNRB transfer correctly, and that a home passing to direct descendants is properly provided for, is worth doing for any married couple who wrote their wills some years ago.

A worked example

A married couple with a combined estate of £900,000, including a £400,000 family home, structure their wills so the first to die leaves everything to their surviving spouse. On the second death, with the home passing to their children, the survivor’s estate benefits from £650,000 combined NRB plus £350,000 combined RNRB - a full £1 million allowance, comfortably covering the £900,000 estate with no Inheritance Tax due at all.

The bottom line

£1 million tax-free for a married couple is genuinely achievable, but it depends on both allowances transferring correctly, a home passing to direct descendants, and the combined estate staying under the £2 million taper threshold - none of which happens automatically without wills structured, and eventually administered, with this specifically in mind.