HM Insights

What are the inheritance tax exemptions?

HMRC has revealed that it collected £5.3 billion from Inheritance Tax (IHT) in 2020/21, an increase of a huge £200 million on the previous year. The current IHT threshold has stagnated since 2009 and with the Chancellor’s announcement of a freeze to the IHT threshold at current levels for the next five years; this is only likely to increase further.


IHT is charged on estates which exceed the Nil Rate Band (NRB) which is currently £325,000. Estates which are excess of this threshold are taxed at 40%. There are however a number of reliefs and exemptions, a couple of which are highlighted below:

Spousal Exemption

Married couples and civil partners can pass assets to each other without incurring an IHT charge. Spouses and civil partners are also able to make use of each other's NRB on second death meaning a potential £650,000 of joint estate can pass free of IHT. For unmarried couples/those not in a civil partnership, there is no such relief available.

Residence Nil Rate Band

In some circumstances, it is possible to utilise the Residence Nil Rate Band (RNRB) which offers an additional relief of £175,000. You can only qualify for the relief if your property passes to direct descendants (i.e. your children or grandchildren). In a similar way to the NRB, the surviving spouse or civil partner can make use of the RNRB on second death bringing the total possible relief for spouses to £1 million.

Whilst it is likely that more estates than ever will be caught by IHT due to the current freeze on IHT levels, there are a number of reliefs and exemptions available and with estate planning, it may be possible to mitigate IHT. There had been suggestions that the Chancellor would announce reform to IHT, however despite reviews by The Office of Tax Simplification reform is yet to be seen

Get in touch

Our approachable Private Client Team at Harper Macleod will work with you in relation to any issue involving inheritance tax.

Useful links

Personal tax services