If someone leaves everything to their spouse or civil partner when they die and the partner has their permanent home in the UK, it’s exempt from Inheritance Tax.
This means their Inheritance Tax threshold hasn’t been used and can be transferred to their partner’s estate when they die, even if they remarry.
So, they could have an Inheritance Tax threshold of up to £650,000 - twice the usual threshold.
How the transfer works
The transfer happens when the second partner dies and is done by their executor or personal representative.
To transfer the threshold, follow the steps below.
Work out what percentage of the threshold you can transfer
The size of the first estate doesn’t matter - if it was all left to the second partner, 100% of the threshold can be transferred.
If the first partner made gifts during their lifetime that weren’t exempt from Inheritance Tax, their value must be deducted from the threshold.
Get the documents together from the first death
You need copies of:
- the will, if there was one
- the grant of representation (or ‘confirmation’ in Scotland), or death certificate if there’s no grant
- any ‘deeds of variation’ used to change the will
Complete and send in the relevant forms
The ones you’ll need depend on how much of the threshold is being transferred and the value of the estate when the second partner dies.
If you’re transferring 100% of the threshold and the estate’s worth less than £650,000, it’s called an ‘excepted estate’. Use form IHT217 on the HM Revenue and Customs (HMRC) website - you need to fill out form IHT205 too.
If the person’s estate is in Scotland or they have Scottish assets, you need to fill out form C5 on the HMRC website.
Some estates don’t count as excepted estates - the HMRC website has more information.
If you’re transferring 100% of the threshold and the estate’s worth more than £650,000, use forms IHT402 and IHT400 - you can get both on the Inheritance Tax page on the HMRC website.
If you’re transferring less than 100% of the threshold or the estate doesn’t qualify as an ‘excepted estate’ you also use forms IHT402 and IHT400.
You also need to send in the forms you need for probate.