Inheritance Tax When the Second Parent Dies: A £900,000 Estate Worked Through to £0 Tax
When the first parent dies, there is usually no inheritance tax because everything passing to a surviving spouse or civil partner is exempt — and crucially, the unused allowances carry forward. On the second death, the survivor can stack two nil-rate bands (£325,000 each) and two residence nil-rate bands (£175,000 each), giving up to £1,000,000 tax-free where a home goes to the children. A £900,000 estate can therefore land at £0 tax — but only if the transfers are actively claimed.
Why the first death usually pays no inheritance tax
Anything left to a UK-domiciled spouse or civil partner is exempt from inheritance tax, with no upper limit. So when the first parent dies and leaves everything to the survivor — which most married couples do — there is normally nothing to pay (GOV.UK: Inheritance Tax).
The important consequence is what it does to the allowances. Because the estate passed to the spouse exempt, none of the first parent's nil-rate band was needed. That unused band is not wasted — it transfers to the survivor and can be used on the second death. The same applies to the residence nil-rate band. This is why estate planning so often focuses on the second death: it is where the tax actually bites, and where both sets of allowances come together.
The four allowances that stack to £1,000,000
Two separate reliefs are in play, and each can be doubled up on the second death:
| Allowance | Amount (2026–27) | Where it comes from |
|---|---|---|
| Nil-rate band (NRB) | £325,000 | The survivor's own band |
| Transferred NRB | £325,000 | First parent's unused band — claimed on IHT402 |
| Residence nil-rate band (RNRB) | £175,000 | Survivor's own band — home to direct descendants |
| Transferred RNRB | £175,000 | First parent's unused RNRB — claimed on IHT436 |
| Total tax-free | £1,000,000 | Where a home passes to children/grandchildren |
The standard nil-rate band is £325,000 and the residence nil-rate band is £175,000; the IHT rate above the threshold is 40%. Both bands are frozen until at least 5 April 2031 (GOV.UK: thresholds and rates). The RNRB only applies where a qualifying residence passes to direct descendants and the estate is below the £2 million taper threshold (GOV.UK: residence nil-rate band).
Worked example — the Okafor family
The set-up. James Okafor died in 2019, leaving his entire estate to his wife Grace. Because spouse transfers are exempt, no inheritance tax was due and none of James's allowances were used. Grace dies in 2026 leaving an estate of £900,000, including the family home worth £550,000, which she leaves to their two children.
Step 1 — Grace's own bands. NRB £325,000 + RNRB £175,000 = £500,000.
Step 2 — transfers from James. James used 0% of his NRB and 0% of his RNRB, so 100% of each transfers: +£325,000 NRB (claimed on IHT402) and +£175,000 RNRB (claimed on IHT436).
Step 3 — stack them. £325,000 + £325,000 + £175,000 + £175,000 = £1,000,000 tax-free threshold.
Step 4 — the tax. Grace's estate is £900,000. That is below the £1,000,000 threshold, so the taxable estate is £0 and the inheritance tax bill is £0. The £550,000 home comfortably uses both £175,000 RNRB amounts because it passes to direct descendants.
The catch: none of this happens automatically. Grace's executors must actively file IHT402 and IHT436 with the IHT400 account. Miss them and HMRC will only apply Grace's own £500,000 — leaving £400,000 taxed at 40% = a £160,000 bill that was entirely avoidable.
Claiming the transfers: percentages, not cash
The transferred allowances are claimed on two forms, submitted with the IHT400 on the second death:
- IHT402 — transfer of unused nil-rate band from the first spouse or civil partner (GOV.UK: IHT402).
- IHT436 — transfer of unused residence nil-rate band (GOV.UK: IHT436 / RNRB guidance).
The key mechanic: transfers are recorded as a percentage, not a fixed cash amount. This matters because the bands are uprated over time (or frozen, as now). If the first parent used none of their band, 100% transfers — and 100% is applied to whatever the band is worth on the second death, not what it was worth years earlier. So a 100% transfer of a £325,000 band gives the survivor a full extra £325,000 today. Working in percentages is how HMRC keeps the relief fair across the gap between the two deaths.
What partial use on the first death does
The full doubling only works if the first parent left everything to the survivor. If they left something directly to the children, part of their nil-rate band was used, and a smaller percentage transfers.
Variation — James leaves £100,000 to the children
Suppose James's will had left a £100,000 legacy to the children, with the rest to Grace. That £100,000 is a chargeable transfer that uses part of his £325,000 nil-rate band:
£100,000 ÷ £325,000 = 30.77% used, leaving 69.23% to transfer.
On Grace's death the transferred NRB is 69.23% × £325,000 = £225,000 (rounded), instead of the full £325,000.
Her total threshold becomes: £325,000 (own NRB) + £225,000 (transferred NRB) + £175,000 (own RNRB) + £175,000 (transferred RNRB) = £900,000. The £100,000 of band James spent on the children's legacy is the exact amount knocked off the eventual headroom.
The same percentage logic applies to the RNRB on IHT436. A useful rule of thumb: anything given to non-exempt beneficiaries (anyone other than a spouse, civil partner or charity) on the first death erodes the band that would otherwise transfer.
The home-left-to-children condition — and downsizing
The residence nil-rate band only applies where a qualifying residential property is left to direct descendants — children (including adopted, foster and stepchildren), grandchildren and their spouses or civil partners (GOV.UK: passing on your home). Leave the home to a sibling, a friend or into a discretionary trust that does not qualify, and the RNRB is not available against it.
A common worry is the parent who sold the family home and moved into a care home or a smaller flat before dying. The relief is not automatically lost. A downsizing addition can preserve the RNRB where the home was sold or downsized on or after 8 July 2015, provided assets of at least equivalent value pass to direct descendants instead. So if Grace had sold the £550,000 house, moved to a £250,000 flat, and the remaining cash plus the flat all went to the children, the downsizing addition can restore the relief that the smaller property alone would not have covered. HMRC's RNRB guidance and calculator work this through (GOV.UK: RNRB and downsizing).
Two things still bite, though. First, the RNRB tapers away on larger estates: it reduces by £1 for every £2 the estate exceeds the £2 million taper threshold, so an estate of £2.35 million or more loses the whole £175,000 RNRB. Second, even with a downsizing addition, value must actually reach the descendants — cash spent on care fees before death simply leaves a smaller estate, with no relief to claim on money that is gone.
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Frequently asked questions
Why is there usually no inheritance tax when the first parent dies?
Anything left to a UK-domiciled spouse or civil partner passes free of inheritance tax under the spouse exemption, with no upper limit. Because the whole estate goes to the survivor, none of the first parent's nil-rate band or residence nil-rate band is used, so both bands carry forward and can be claimed on the second death.
How can a couple pass on up to £1 million tax-free?
Each person has a £325,000 nil-rate band and, where a home passes to children or grandchildren, a £175,000 residence nil-rate band. On the second death the survivor can use their own bands plus the unused bands transferred from the first parent: £325,000 + £325,000 + £175,000 + £175,000 = £1,000,000. Both bands are frozen until at least 5 April 2031.
Which forms claim the transferred allowances?
Form IHT402 claims the transfer of the unused nil-rate band from the first spouse, and form IHT436 claims the transfer of the unused residence nil-rate band. Both are submitted with the IHT400 account on the second death. The transfer is recorded as a percentage of the band that was unused, not a fixed cash figure.
What if the first parent left some money directly to the children?
A gift to children on the first death uses part of that parent's nil-rate band, so a smaller percentage transfers to the survivor. For example, a £100,000 legacy to children on the first death uses about 30.77% of the £325,000 band, leaving only 69.23% to carry forward, which reduces the combined tax-free total available on the second death.
Does the residence nil-rate band still apply if the house was sold before death?
The residence nil-rate band normally requires a qualifying home to pass to direct descendants on death. If the home was sold or the couple downsized on or after 8 July 2015, a downsizing addition can preserve the lost relief, provided assets of at least equivalent value pass to direct descendants. If no home and no qualifying replacement assets pass to descendants, the residence band may be lost.
Is the £1 million tax-free figure automatic?
No. The full £1 million only applies where a home passes to children or grandchildren, both residence nil-rate bands are available, and the estate is below the £2 million taper threshold. Above £2 million the residence nil-rate band reduces by £1 for every £2 of excess. The transfers must also be actively claimed on IHT402 and IHT436.
Maximum tax-free on the second death where a home passes to children (both bands transferred).
Both the £325,000 NRB and £175,000 RNRB are frozen until at least this date.
General information, not personal United Kingdom tax/legal advice. Verify with a qualified professional.
Sources: GOV.UK — Inheritance Tax, Passing on your home, Thresholds and rates, Residence nil-rate band, IHT402. Figures stated for tax year 2026–27.