Comparison · 2026/27
Spouse Exemption vs Transferable Nil Rate Band
These two reliefs work as a pair rather than as alternatives: using the spouse exemption on first death is what generates an unused nil rate band that can transfer to the survivor. This guide explains how they fit together and where couples sometimes get the planning wrong.
At a Glance
| Feature | Spouse Exemption | Transferable Nil Rate Band |
|---|---|---|
| When it applies | On first death, for gifts to spouse | On second death, using unused NRB |
| Value limit | Unlimited (UK-domiciled spouse) | Up to £325,000 extra (2026/27) |
| Claimed by | Automatic on qualifying transfers | Executors of second estate (IHT402) |
| Effect of full use | No tax on first death | Up to £650,000 combined NRB later |
| Available to unmarried couples? | No | No |
Nil rate band shown is £325,000 and residence nil rate band £175,000 for 2026/27, both frozen until 2030. Confirm current figures on gov.uk.
How the Spouse Exemption Works
Any transfer between UK-domiciled spouses or civil partners — whether a lifetime gift or an inheritance on death — is entirely exempt from Inheritance Tax, with no upper limit. This means an estate of any size passing to a surviving spouse triggers no Inheritance Tax on first death, however much the couple\'s combined wealth exceeds the nil rate band.
Where a UK-domiciled spouse gifts to a non-UK domiciled spouse, the exemption is capped at a set limit matching the nil rate band, unless the non-domiciled spouse elects to be treated as UK-domiciled for Inheritance Tax purposes, which brings worldwide assets into scope but restores the unlimited exemption.
How the Transferable Nil Rate Band Works
When a person dies and does not use all of their own £325,000 nil rate band — most commonly because assets passed to their spouse using the spouse exemption — the unused percentage can be transferred to the surviving spouse\'s estate. If 100% of the nil rate band goes unused, the survivor\'s own estate benefits from an effective £650,000 nil rate band (2026/27) when they later die.
The claim must be made by the executors administering the second estate, using form IHT402 with supporting details from the first death. A similar transferable mechanism applies to the residence nil rate band, potentially sheltering up to £1 million combined between both nil rate bands for a couple who fully use both allowances and pass a qualifying home to direct descendants.