Inheritance tax exemptions: what you can leave completely tax free (UK)

18 September 2026 · Inherit Vault

Most estates in this country pay no inheritance tax whatsoever. That isn't because everyone's poor, it's because the exemptions are broader than the headlines suggest, and they stack. Knowing which ones apply to you is the difference between a 40% bill and nothing.

The threshold everyone knows

The nil rate band is £325,000. Below that, no inheritance tax. Above it, the excess is taxed at 40%. The band has been frozen at £325,000 for a very long time now and is set to stay frozen until April 2031, which quietly drags more estates over the line every year as house prices move and the threshold doesn't.

Anything to a husband, wife or civil partner

Transfers between spouses and civil partners are wholly exempt under section 18 of the Inheritance Tax Act 1984. No limit, no cap, no form to argue about. You can leave your entire estate to your spouse and there's no inheritance tax on your death at all. Note the precision of the word: spouse or civil partner. Not partner. Living together for thirty years buys you nothing here, which is a cruelty we've written about in the common law marriage myth.

One caveat worth knowing: from 6 April 2025 the old domicile test was replaced by long-term UK residence, so where the receiving spouse isn't long-term UK resident the exemption can be restricted. If that might be you, it's a proper advice question rather than a blog one.

The unused band passes to your spouse too

When the first of a couple dies, whatever percentage of their nil rate band they didn't use transfers to the survivor. Leave everything to your wife and you've used none of yours, so she has 100% of yours on top of her own. That's £650,000 of nil rate band on the second death. The claim is made by the executors on the second death, and it depends on records from the first, sometimes decades earlier, which is exactly the sort of paperwork nobody keeps.

Charities, and the 36% rate

Gifts to charity are exempt from inheritance tax entirely. There's also a sweetener: leave 10% or more of the net value of your estate to charity and the rate on the rest drops from 40% to 36%. Net value means the total minus debts and minus the nil rate band. It's one of the few places in the tax system where giving more away leaves the family with a similar amount, and it's badly underused.

The extra band for your home

On top of the £325,000 there's a residence nil rate band of up to £175,000 where a home passes to direct descendants. It has its own rules and its own trapdoor for larger estates, so it gets its own piece later in this series. For now, the headline is that a married couple leaving a house to their children can reach £1m of combined threshold.

Agricultural and business property

Qualifying farmland and qualifying business assets get relief at 100% or 50%. Since 6 April 2026 the 100% band is capped at a combined £2.5m per person, with 50% relief above that, covered in full in the farming piece. These are reliefs rather than exemptions, which matters because they have to be claimed and evidenced, not assumed.

Lifetime gifts that never count

Several gifts are exempt the moment you make them: £3,000 a year in total, £250 per person in small gifts, wedding gifts of £5,000 to a child or £2,500 to a grandchild, and regular gifts out of surplus income. Everything else is subject to the seven year rule, which is far less frightening than its reputation once you understand the nil rate band does most of the work.

Pensions, for one more tax year

Unused pension pots have historically sat outside the estate entirely, which made them the most tax-efficient thing most people owned. That ends on 6 April 2027, when unused pension funds and death benefits come into the inheritance tax net and executors become responsible for reporting and paying it. Death in service benefits from a registered scheme stay outside. If your plan leans on pensions being exempt, that plan has an expiry date.

Some things that aren't exempt but feel like they should be

Life policies pay into the estate and are taxable unless they're written in trust, which is a free thing to arrange and frequently isn't. Jointly held property passing by survivorship is still in the estate for tax even though it skips probate. And money you gave away but carried on enjoying, the classic being the house you signed over while still living in it, is treated as though you never gave it away at all.

The exemptions aren't hard, but they're conditional, and almost every condition is proved with a document: a marriage certificate, the first spouse's grant, a deed of trust, a charity's registration number, a record of gifts. The tax rules are published and stable. Whether your executors can actually claim what you're entitled to depends on whether they can find the paperwork, and that part is entirely within your control today.

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