TL;DR: When the second parent dies, the inheritance tax (IHT) bill is calculated against the estate at that death, with the surviving spouse exemption from the first death no longer relevant. UK IHT is charged at 40 percent on the part of the estate above the nil-rate band of 325,000 pounds, with two additional reliefs that often eliminate IHT on a typical family home: the transferable nil-rate band (TNRB - the unused 325,000-pound allowance from the first death transferred to the second), and the residence nil-rate band (RNRB - up to 175,000 pounds per spouse, available when a home passes to direct descendants). Used in full, a married couple can pass on up to 1 million pounds free of IHT (325k + 325k + 175k + 175k). Beyond the allowances, the main legal routes to reduce IHT are: lifetime gifts that survive seven years, gifts out of normal expenditure from income, the annual gift exemption, charitable bequests, business and agricultural relief, and (more rarely) a deed of variation on the first death.
Last reviewed May 2026
Inheritance tax on the second parent's estate is the most common UK IHT trigger because almost all UK couples leave everything to each other on the first death (the unlimited spouse exemption means no IHT is paid then), and the family's wealth is then concentrated in a single estate that exceeds the nil-rate band on the second death. Whether IHT is actually due depends heavily on the structure of the wills, the value of the family home, and whether lifetime planning was done.
This guide walks through the IHT calculation on a second-parent death: the nil-rate band and how the transferable element works, the residence nil-rate band rules, the lifetime gift mechanisms, the role of business and agricultural property relief, charitable bequests, and the limited (but sometimes useful) post-death deed of variation. The aim is to set out what is actually legal under current UK rules - not aggressive avoidance schemes that have generally been closed down by anti-avoidance legislation.
The nil-rate band and how it transfers
The standard nil-rate band (NRB) for IHT is 325,000 pounds. It has been frozen at this figure since April 2009 and the freeze is currently scheduled to continue under Finance Act 2024 announcements. Anything above the NRB in the estate is potentially subject to IHT at 40 percent.
The transferable nil-rate band (TNRB) was introduced by Finance Act 2008. When the first spouse or civil partner dies and leaves their entire estate to the survivor, the spouse exemption means no IHT is paid - but the deceased's NRB is unused. The unused percentage of the NRB transfers to the surviving spouse, who therefore has the equivalent of two NRBs available on their death.
If the first death predates the 2007 changes or used part of the NRB (for example, gifts to children rather than wholly to spouse), the TNRB is the unused proportion - not necessarily the full 325,000 pounds. The executors of the second estate claim TNRB on form IHT436 and need evidence of the first estate's NRB usage.
The residence nil-rate band (RNRB)
The residence nil-rate band was introduced from April 2017 and stepped up to 175,000 pounds by 2020-21 (where it has been frozen). It is available where a "qualifying residential interest" (the deceased's home, or the proceeds of selling a home in some cases) passes to a "direct descendant" (child, grandchild, stepchild, adopted child, foster child, or a spouse or civil partner of those).
The RNRB also has a transferable element. When the first spouse dies with the RNRB unused (because the home passed to the surviving spouse), the unused RNRB transfers to the second death. A married couple with a family home left to children can therefore use 175,000 + 175,000 = 350,000 pounds of RNRB plus 325,000 + 325,000 = 650,000 pounds of standard NRB, totalling 1 million pounds of IHT-free allowance.
The RNRB tapers for estates worth more than 2 million pounds: 1 pound of RNRB is lost for every 2 pounds of estate value above the 2 million threshold. The full RNRB is therefore unavailable to estates above 2.7 million pounds (2 million + 2 x 350,000 to use both spouses' RNRB). Tapering means very large estates do not benefit from the RNRB.
Lifetime gifts and the seven-year rule
The most common lifetime IHT planning route is outright gifts during life. An outright gift to an individual is a "potentially exempt transfer" (PET). If the donor survives seven years from the gift, it is exempt from IHT entirely. If the donor dies within seven years, the gift uses up the donor's NRB first (with taper relief on the rate of tax for gifts between three and seven years before death).
Gifts to trusts are "chargeable lifetime transfers" (CLTs) and are immediately subject to IHT at the lifetime rate (20 percent) on any value above the available NRB. CLTs also use up the NRB for seven years and have a ten-year periodic charge regime inside the trust under the relevant property regime.
The annual gift exemption is 3,000 pounds per donor per tax year. The exemption can be carried forward one year if unused, so a donor with no recent gifts can give 6,000 pounds in the first year. Wedding gifts have their own exemptions: 5,000 pounds to a child, 2,500 pounds to a grandchild, 1,000 pounds to anyone else. Small gifts of 250 pounds to any number of different individuals each tax year are also exempt.
The "normal expenditure out of income" exemption is one of the most useful but least known. Regular gifts that are part of the donor's normal expenditure, made out of income (not capital), and leave the donor with sufficient income for their usual standard of living, are immediately exempt from IHT with no seven-year wait. Documentation showing the gift pattern and the income surplus is critical to a successful claim.
Charitable bequests and the reduced rate
A bequest to a UK-registered charity (or to certain national institutions like the National Gallery) is fully exempt from IHT. Where at least 10 percent of the "net chargeable estate" passes to charity, the IHT rate on the rest of the chargeable estate is reduced from 40 percent to 36 percent under section 7(1)(b) of the Inheritance Tax Act 1984.
The 10 percent test is calculated against the net chargeable estate (the estate after NRB, RNRB, debts, and other exemptions). For estates close to the threshold, leaving slightly more to charity can mean the residual beneficiaries receive more than they would otherwise have done after a higher tax rate.
Charitable bequests in the will are simpler than lifetime gifts to charity, but lifetime gift aid donations also generate income tax relief during life and reduce the estate.
Business and agricultural property relief
Business property relief (BPR) and agricultural property relief (APR) are two of the most significant IHT reliefs. BPR provides 100 percent relief on shares in an unquoted trading company, qualifying business assets, or certain quoted shares (very limited categories). APR provides 100 percent relief on owner-occupied farmland and 50 percent on certain tenanted farmland.
Both reliefs require a minimum two-year holding period (with some exceptions for inherited property) and have detailed conditions on what counts as a "trading" rather than "investment" activity (sections 105 and 116 of the Inheritance Tax Act 1984). The reliefs were the subject of reform announcements at the 2024 Autumn Budget: the new rules (which include a combined 1 million pound BPR/APR cap at the 100 percent rate, with 50 percent relief above) take effect from April 2026.
For families with a qualifying business or farm, BPR and APR can be transformative for the second-death IHT position, but the reformed rules require careful re-planning around the new cap.
Deed of variation on the first death
A deed of variation is a written agreement among the beneficiaries of an estate to redirect inheritance to other people, treated for IHT purposes as if the redirection had been made by the deceased. The deed must be made within two years of the death and signed by all affected beneficiaries.
Where the first parent's will left everything to the surviving spouse, a deed of variation can redirect part of the inheritance to the children (using up part of the first parent's NRB) so that less wealth concentrates in the surviving spouse's estate. This is sometimes useful where the surviving spouse already has sufficient assets and the long-term IHT cost of the survivor's larger estate exceeds the short-term benefit of full spouse exemption.
A deed of variation needs the agreement of every affected beneficiary, and the redirection must be the kind a court would approve. A solicitor is normally involved in drafting and the executors must file form IHT35 with HMRC.
How we verified this
The nil-rate band, the transferable nil-rate band, the residence nil-rate band, and the tapering rules reflect the Inheritance Tax Act 1984 as amended by Finance (No.2) Act 2015 (RNRB) and Finance Act 2008 (TNRB). The seven-year potentially exempt transfer regime, lifetime gift exemptions, the normal-expenditure-from-income exemption, and the reduced charitable rate reflect the IHTA 1984 and current HMRC guidance. Business property relief and agricultural property relief reflect sections 103-114 of the IHTA 1984, with the post-April 2026 reforms reflecting Finance (No.2) Bill 2024-25 announcements. The deed of variation provisions reflect section 142 of the IHTA 1984. No specific HMRC reference numbers, adviser names, or future-tax forecasts have been invented; the rules and allowances are as set out in the legislation in force at the time of writing.
Disclaimer: This article is general information about UK inheritance tax planning on a second parent's death. It is not personal tax or legal advice. The right strategy in any specific case depends on the value and composition of the estates, the wills, business interests, family circumstances, and the time horizon. Aggressive avoidance schemes have been closed down repeatedly by anti-avoidance legislation; the routes described here are the legitimate ones. Anyone with a substantial estate should take advice from a solicitor (STEP-qualified for estate planning) or chartered tax adviser.
Frequently asked questions
How much can a married couple leave free of UK inheritance tax?
Up to 1 million pounds, where the full residence nil-rate band is available. The maths is: 325,000-pound NRB plus 325,000-pound transferable NRB plus 175,000-pound RNRB plus 175,000-pound transferable RNRB = 1 million pounds. The RNRB requires the family home to pass to direct descendants and tapers away for estates above 2 million pounds.
Is the unused inheritance tax allowance from my first parent transferable?
Yes. Where the first parent left everything (or most things) to the surviving spouse, the unused percentage of the nil-rate band transfers to the second death. The executors claim the transferable nil-rate band on form IHT402 (or IHT436 for the RNRB) using evidence of the first estate's allowance usage.
How can I reduce inheritance tax on the second parent's estate?
Make use of the transferable nil-rate band, ensure the home is left to direct descendants to qualify for the RNRB, consider lifetime gifts that benefit from the 7-year rule, use the annual gift exemption (3,000 pounds), use the "normal expenditure out of income" exemption for regular gifts, leave at least 10 percent of the chargeable estate to charity to access the 36 percent reduced rate, and consider business or agricultural property relief if applicable.
How long do I have to file a deed of variation?
Within two years of the date of death. All affected beneficiaries must sign. The executors file form IHT35 with HMRC if the variation changes the IHT position of the estate. A deed of variation cannot be used to retrospectively change what has already been distributed.
Do gifts within seven years of death attract inheritance tax?
Potentially yes. A gift made within seven years of death uses up the deceased's nil-rate band first, with taper relief on the rate of tax for gifts made between three and seven years before death. Gifts made more than seven years before death are entirely exempt under the seven-year rule (unless they involve a reservation of benefit, which restarts the clock).
