What’s the Inheritance Tax Threshold for Married Couples?

My husband and I have recently celebrated our 40th wedding anniversary. As we are now getting on in years, we’ve started to think about the legacy we’d like to leave for our children in our wills. The family home was recently valued at around £500,000 and we have some cash savings and investments.

Ideally we’d like everything to go to our children after we pass on, but we’re worried this will saddle them with a large inheritance tax bill. How much can we leave behind without them facing this liability?

Question asked by Samantha Reed

First of all, congratulations on your landmark anniversary!

Spouses and Inheritance Tax Allowances

Now to get down to business: the inheritance tax (IHT) threshold for married couples in the 2022/23 tax year is £650,000, providing the first person to pass away leaves all of their assets to their surviving spouse. There is no inheritance tax to pay on transfers between married couples.

When the first spouse to die leaves 100% of their estate to their surviving spouse, the deceased spouse’s entire £325,000 ‘nil-rate band’ — which was introduced at the start of the 2009/10 tax year and will remain frozen at £325,000 until at least end of 2020/21 tax year — passes to the surviving spouse, doubling the survivor’s nil-rate band to £650,000.

The Main Residence Nil-Rate Band

From the start of the 2017/18 tax year, the nil-rate band was enhanced to cover main residences, with an additional allowance of £100,000 per person on the main residence when it’s passed to a direct descendant.

Thereafter, this additional allowance increases by £25,000 each year until the 2020/21 tax year, when it will stand at £175,000. From then it is scheduled to rise in line with inflation based on the consumer prices index (CPI).

This means that by the start of the 2020/21 tax year, married couples/civil partners will have a joint £1 million inheritance tax allowance on their estates, with each spouse qualifying for the full nil-rate band of £325,000 each for a total of £650,000, plus a main residence nil-rate band of £175,000 each for a total of £350,000 (so long as they leave their main property to a recognised descendant).

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