Your will decides how much use your estate can make of the inheritance tax reliefs. Who inherits, whether outright or through a trust, and how a gift is framed decide whether the spouse exemption, the residence nil rate band, business relief or the 36% charity rate apply. We are Tax Advisors, not solicitors: we do not draft wills, but we work with your solicitor on the tax effect of what the will says. For the basic rates and thresholds, see how much is inheritance tax.
Leaving everything to a spouse or civil partner
Gifts to a spouse or civil partner are normally exempt without limit, and any nil rate band the first spouse does not use can be claimed later by the survivor's estate. For many couples, "everything to each other" works well.
The exception: since 6 April 2025, inheritance tax follows long-term UK residence rather than domicile. Where the person who passes away is a long-term UK resident and their spouse is not, the exemption is capped at £325,000. The survivor can elect to be treated as long-term resident, which lifts the cap. After a death the election is normally due within two years, cannot be revoked, and brings the survivor's own worldwide assets into UK inheritance tax. See residence, not domicile.
The family home: "closely inherited"
The residence nil rate band, up to £175,000 per person, applies only where a home or a share of one is closely inherited: by a lineal descendant such as a child or grandchild, by a descendant's spouse or civil partner, or the widow or widower of a descendant who passed away earlier and has not remarried. Step-children, adopted and fostered children, and children you became guardian or special guardian to before they were 18 all count. Nephews, nieces, siblings and friends do not.
- The descendant must become entitled on your death. A home left to grandchildren only once they reach 25 does not qualify.
- Some trusts work: an immediate life interest or a disabled person's trust for a descendant, or a bereaved minor's trust or 18 to 25 trust for your own child. A discretionary trust generally does not.
- The taper: the band falls by £1 for every £2 the estate exceeds £2 million, measured before spouse exemption and business relief.
- Downsizing: if you sold, gave away or moved to a cheaper home on or after 8 July 2015, a downsizing addition can restore lost band, provided other assets pass to direct descendants.
Unused residence band can pass to a surviving spouse or civil partner, never to an unmarried partner.
Business and farm assets from 6 April 2026
The Finance Act 2026 gives each person a single £2.5 million allowance for 100% business and agricultural relief, covering qualifying property at death and qualifying gifts made from 30 October 2024 in the seven years before. Above it, relief is 50%. Shares on markets HMRC does not treat as listed, such as AIM, get 50% only and do not use the allowance.
Any unused allowance can be claimed by a surviving spouse or civil partner's estate, up to £5 million in total, and if the first spouse passed away before 6 April 2026 the whole £2.5 million is treated as unused. So leaving business assets to a spouse no longer wastes the first allowance. It does concentrate value in the survivor's estate, where relief depends on the assets still qualifying at the second death.
Wording matters too: under section 39A of the Inheritance Tax Act 1984, a specific gift of business or farm property carries its own relief, while relief on property in residue is spread across the estate. Shares left specifically to children with the residue to a spouse can give a very different bill from everything in residue. See our succession planning service.
Charity and the 36% rate
If at least 10% of the "baseline amount" goes to charity, the rate on that part of the estate falls from 40% to 36%. The baseline is broadly the estate after the nil rate band, with the charitable gift added back, so the gift needed is smaller than 10% of the whole estate. A fixed sum can drift either side of the test, which is why HMRC accepts a formula clause that always gives 10% of the baseline. For deaths from 6 April 2026, property must be given to a charity itself: leaving it on trust for charitable purposes no longer qualifies.
Trusts written into the will
Nil rate band discretionary trusts. Before unused bands became transferable in October 2007, many wills put a sum equal to the nil rate band into a discretionary trust on the first death. That can still suit second marriages or a wish to protect assets, but the first band is used rather than passed on, and a home in the trust gets no residence band.
Two-year discretionary will trusts. If trustees of a discretionary trust created by the will appoint property out within two years of death, before any beneficiary gains a right to the trust income (an interest in possession), tax is worked out as if the will had said so (section 144). An appointment to the spouse can then be exempt, and an appointment of the home to a child can secure the residence band. See our trusts service.
Changing things after death
Within two years of a death, beneficiaries can redirect what they inherit, with or without a will. For the change to count as made by the deceased, the written variation must state that the beneficiaries intend section 142 (inheritance tax) or section 62 (capital gains tax) to apply. If more inheritance tax becomes payable, the executors must join in and HMRC needs a copy within six months. It cannot be done in return for payment, and it depends on adult beneficiaries agreeing, so treat it as a safety net rather than a plan.
If there is no will
In England and Wales, a spouse or civil partner with children receives the personal possessions, the first £322,000 (deaths from 26 July 2023) and half the rest; the children take the other half, which may be taxable. The intestacy rules provide for spouses, civil partners and relatives only, so an unmarried partner inherits nothing under them and gets no spouse exemption. Scotland has its own rules: for deaths from 30 April 2024 a spouse takes everything where there are no children or grandchildren.
Pensions, overseas assets and reviews
Most pension schemes are discretionary, so death benefits follow the scheme rules, usually guided by your nomination form, not your will. From 6 April 2027 unused funds will count towards the estate anyway, so plan the will and nominations together: see pensions and inheritance tax from April 2027. Long-term UK residents are taxed on overseas assets too, and property abroad may follow local succession law, so a local will may be needed alongside the UK one.
GOV.UK suggests reviewing a will every five years and after events such as marriage (which in England and Wales cancels an earlier will), separation, a new child or a move. The 2025, 2026 and 2027 tax changes are reasons too.
| What the will says | Inheritance tax effect |
|---|---|
| Everything to my spouse | Exempt, unused bands pass on; capped at £325,000 if the spouse is not long-term UK resident and does not elect |
| Home to my children outright | Residence band up to £175,000, tapered above £2 million |
| Home to grandchildren at 25, or to a nephew | No residence band |
| 10% of the baseline amount to charity | 36% rate on that part of the estate |
| Company shares to my children | 100% relief within the £2.5 million allowance, 50% above |
| No will, unmarried couple | Partner inherits nothing; no spouse exemption |
What to do now
- Find your will and note what has changed since it was signed.
- List your assets, including pensions, business interests and anything overseas.
- Check whether your home will be closely inherited, and whether the estate is near £2 million.
- If your spouse is not a long-term UK resident, check the £325,000 cap.
- Compare any business or farm with the £2.5 million allowance.
- Update pension nominations to fit the will.
- Ask your solicitor to involve us before the new will is signed.
We work alongside your solicitor through our inheritance tax planning service. Book a consultation to review your will and estate together.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.