Inheritance Tax When Second Parent Dies: UK Thresholds, Allowances & Calculation Guide

When the second parent dies, their estate can be subject to UK Inheritance Tax (IHT) at 40% on the taxable value above the available allowances. However, where a married couple or civil partners have unused allowances from the first death, the surviving estate can potentially benefit from up to £1 million of combined Nil-Rate Band and Residence Nil-Rate Band.

How Inheritance Tax Works When the Second Parent Dies

The IHT position on the second death is different from the first death. When the first spouse or civil partner dies and assets pass to the surviving spouse or civil partner, the spouse or civil partner exemption can normally prevent IHT on that transfer. Unused Nil-Rate Band (NRB) and Residence Nil-Rate Band (RNRB) can then potentially be transferred to the survivor’s estate.

This is why people often refer to the £1 million Inheritance Tax threshold for married couples. It is not a universal £1 million allowance. It is the potential combination of two £325,000 NRBs and two £175,000 RNRBs, subject to the relevant conditions.

The £325,000 Nil-Rate Band

The standard Nil-Rate Band (NRB) is £325,000. It can generally be set against the value of an individual’s estate for IHT purposes.

If the first spouse or civil partner did not use all of their NRB, the unused percentage can potentially transfer to the surviving spouse or civil partner. This can give the second estate a combined NRB of up to £650,000.

The £175,000 Residence Nil-Rate Band

The Residence Nil-Rate Band (RNRB) can provide an additional allowance of up to £175,000 when a qualifying residence passes to direct descendants.

An unused RNRB can potentially transfer to a surviving spouse or civil partner. Therefore, a qualifying second estate can potentially have up to £350,000 of combined RNRB.

The Potential £1 Million Combined Allowance

Where both parents qualify fully for transferable NRB and RNRB:

• First NRB: £325,000
• Second NRB: £325,000
• First RNRB: £175,000
• Second RNRB: £175,000
• Potential combined allowances: £1,000,000

The £1 million figure therefore depends on the estate meeting the conditions for both allowances and having enough unused allowances available from the first death.

Inheritance Tax Threshold When Second Parent Dies

For deaths in the 2026/27 tax year, the main IHT thresholds remain:

The NRB is fixed at £325,000 and the RNRB at £175,000. The RNRB taper begins when the relevant estate exceeds £2 million.

Step-by-Step Inheritance Tax Calculation

Consider a surviving parent’s estate worth £1.3 million.

Assume:

• The first parent’s unused NRB transfers in full.
• The first parent’s unused RNRB transfers in full.
• The family home qualifies for the RNRB.
• The home passes to direct descendants.
• There are no lifetime transfers reducing the available allowances.
• No other reliefs or exemptions affect the calculation.

Step 1: Value the Estate

Gross estate: £1,300,000

This can include property, investments, bank accounts, shares, valuable possessions and other assets within the estate.

Step 2: Deduct Available Allowances

Combined NRB and RNRB: £1,000,000

Step 3: Calculate the Taxable Estate

£1,300,000 − £1,000,000 = £300,000

Step 4: Apply the 40% IHT Rate

£300,000 × 40% = £120,000 IHT

Therefore, under these assumptions, the estate would have an estimated £120,000 Inheritance Tax liability.

Actual IHT calculations can be different because lifetime gifts, debts, exemptions, reliefs, trusts and the exact ownership of assets can affect the taxable estate.

Why the First Parent’s Death Often Does Not Create an IHT Bill

The first death does not necessarily trigger a large IHT liability for a married couple or civil partners.

Assets passing to the surviving spouse or civil partner can generally qualify for the spouse or civil partner exemption. This can allow assets to pass without IHT at that stage.

The unused proportion of the deceased person’s NRB and RNRB can then potentially be claimed by the surviving spouse or civil partner’s estate when they die.

This makes the paperwork from the first death important. Executors should retain evidence showing what happened to the first parent’s estate and which allowances were used.

When Does the Residence Nil-Rate Band Apply?

The RNRB is an additional IHT allowance connected with a qualifying residence.

The Property Must Qualify

The residence must meet the relevant conditions for RNRB. The allowance is generally based on the value of the qualifying residence or the relevant share passing to qualifying direct descendants, subject to the available RNRB.

The Home Must Pass to Direct Descendants

The RNRB is designed for situations where a qualifying residence passes to direct descendants.

These can include:

• Children
• Stepchildren
• Adopted children
• Foster children in qualifying circumstances
• Grandchildren and other qualifying direct descendants

A transfer to a sibling, niece or nephew does not generally satisfy the direct descendant requirement.

The £2 Million Taper

The RNRB is reduced when the relevant estate exceeds £2 million.

The reduction is £1 of RNRB for every £2 by which the estate exceeds £2 million.

For example, if the estate is £2.2 million, it exceeds the taper threshold by £200,000.

The potential RNRB reduction would therefore be:

£200,000 ÷ 2 = £100,000

A £175,000 RNRB could therefore be reduced to £75,000, before considering any other factors.

How to Reduce Inheritance Tax When the Second Parent Dies

There is no single method that eliminates IHT for every family. Effective planning depends on the size and structure of the estate, lifetime gifts, property ownership, pensions, businesses and the intended beneficiaries.

Lifetime Gifts and the 7-Year Rule

A person can make lifetime gifts during their lifetime. Some gifts are Potentially Exempt Transfers (PETs).

A PET can become exempt from IHT if the donor survives seven years after making the gift, subject to the relevant rules.

If the donor dies within seven years, the gift can become relevant when calculating the IHT position. The timing and value of gifts should therefore be recorded carefully.

Use the £3,000 Annual Exemption

The annual exemption can allow an individual to give away up to £3,000 of gifts each tax year without those gifts being subject to IHT, subject to the rules.

Unused annual exemption from the previous tax year can potentially be carried forward for one year.

Other exemptions can also apply, including certain small gifts and qualifying wedding or civil partnership gifts.

Regular Gifts From Income

Regular gifts made from normal income can potentially qualify for the normal expenditure out of income exemption.

This exemption is different from the £3,000 annual exemption. The person making the gifts generally needs to be able to demonstrate that:

• The gifts are made as part of normal expenditure.
• They are made from income.
• The gifts do not affect the donor’s normal standard of living.

Good records are particularly important when relying on this exemption.

Trusts and Inheritance Tax Planning

Trusts can be used for control, asset protection and estate planning, but they do not automatically eliminate IHT.

Bare Trusts

A bare trust generally gives a beneficiary an immediate and absolute entitlement to the trust assets.

Discretionary Trusts

A discretionary trust can give trustees greater control over when and how beneficiaries receive assets.

However, relevant property trusts can have their own IHT rules, including potential 10-year anniversary charges and exit charges. Professional advice should therefore be obtained before transferring significant assets into a trust.

Business Property Relief

Business Property Relief (BPR) can reduce the IHT value of qualifying business interests.

The availability of BPR depends on the nature of the business or asset, ownership period and other statutory conditions.

Business owners should not assume that every company share or business asset automatically qualifies. The rules should be reviewed as part of wider estate planning.

Pension Planning and Inheritance Tax

Pensions require careful consideration because their IHT treatment can differ from ordinary investment assets.

The rules are also changing. From 6 April 2027, most unused pension funds and death benefits are due to be brought within the IHT estate under the government’s planned reforms, subject to the applicable legislation and exemptions.

This means families with substantial pension assets should review their estate plan rather than relying on older assumptions about pensions being outside IHT.

Whole-of-Life Insurance Written in Trust

Some families use whole-of-life insurance to provide funds to meet an expected IHT liability.

Writing a policy into an appropriate trust can help keep the policy proceeds outside the deceased’s estate for IHT purposes, subject to the trust arrangement and relevant rules.

The purpose is generally not to reduce the IHT liability itself. Instead, the insurance can provide liquidity to help beneficiaries or executors meet the tax bill.

Can You Avoid Inheritance Tax When the Second Parent Dies?

The legal objective should usually be IHT mitigation, rather than attempting to avoid tax through artificial arrangements.

Potential planning areas include:

• Making lifetime gifts early enough for the 7-year rules to apply.
• Using annual and other available gift exemptions.
• Making qualifying regular gifts from income.
• Reviewing ownership of the family home.
• Preserving transferable NRB and RNRB.
• Considering qualifying business reliefs.
• Reviewing pension arrangements.
• Considering appropriate life insurance.
• Using trusts where they have a genuine estate-planning purpose.
• Keeping detailed records of lifetime gifts and financial transactions.

The correct strategy depends on the estate. A transfer that reduces IHT can also affect control, access to capital and the donor’s financial security.

What Happens When the Second Parent Dies?

The executors or personal representatives must establish the value of the estate and determine whether IHT is payable.

Step 1: Identify the Assets

Create a complete list of:

• Property
• Bank accounts
• Investments
• Shares
• Business interests
• Vehicles
• Valuable personal possessions
• Pension benefits where relevant
• Trust interests
• Overseas assets where relevant

Step 2: Identify Debts and Liabilities

Relevant liabilities can include qualifying mortgages, loans, funeral expenses and other debts.

Step 3: Review Lifetime Gifts

Review gifts and other transfers made during the seven years before death, together with earlier transfers where relevant to the IHT calculation.

Step 4: Establish Available Allowances

Check:

• NRB
• Transferred NRB
• RNRB
• Transferred RNRB
• Relevant exemptions
• Applicable reliefs

Step 5: Calculate the Taxable Estate

The taxable estate is broadly the value remaining after allowable deductions, exemptions and reliefs.

Step 6: Report the Estate

Where required, the personal representatives submit the appropriate IHT account to HMRC.

IHT400, IHT402 and IHT435

The forms used depend on the circumstances of the estate.

IHT400

IHT400 is the detailed Inheritance Tax account used where a full account is required.

IHT402

IHT402 is used to claim a transfer of unused NRB from a deceased spouse or civil partner.

IHT435

IHT435 is used to claim the Residence Nil-Rate Band in relevant estates.

HMRC states that the RNRB claim information is provided through the IHT400 account and IHT435.

When Must Inheritance Tax Be Paid?

Generally, IHT due on most assets must be paid by the end of the sixth month after the person died to avoid interest being charged from the relevant date.

For example, if someone dies during January, the usual payment deadline is 31 July.

Some assets, such as certain property and business interests, may qualify for payment by instalments. HMRC’s rules distinguish between instalment-option and non-instalment-option property.

The IHT payment position should be dealt with early because executors may need evidence of tax payment before obtaining the Grant of Probate for some assets.

How to Reduce the IHT Bill Before the Second Death

Estate planning is most effective when started before the second death.

Review Both Parents Estates

Look at the assets owned by each parent, how they are owned and what happened when the first parent died.

Confirm Transferred Allowances

Do not assume that the full transferable allowances will be available. The percentage transferred depends on what happened to the first parent’s estate.

Review the Family Home

Check who owns the home, its value, whether it qualifies for RNRB and who will inherit it.

Record Lifetime Gifts

Keep records showing:

• Date of gift
• Amount or value
• Recipient
• Reason for gift
• Source of funds
• Any relevant exemption claimed

Review Business Assets

If the family owns a trading business, determine whether BPR may apply and whether the ownership structure remains suitable.

Review Insurance

Where an IHT liability is expected, consider whether insurance could provide sufficient liquidity to meet the tax bill.

Inheritance Tax on the Second Death: Key Numbers

These thresholds are currently fixed at these levels through the relevant period, including 2026/27, subject to the conditions for each allowance.

Frequently Asked Questions

Do you pay Inheritance Tax when the second parent dies?

Potentially. The second parent’s estate is assessed for IHT based on its value, available allowances, lifetime transfers, exemptions and reliefs. A qualifying married couple can potentially have up to £1 million of combined NRB and RNRB available, but this is not automatic.

What is the Inheritance Tax threshold when the second parent dies?

The standard NRB is £325,000, while the RNRB can provide up to another £175,000 where the relevant conditions are met. If unused allowances from the first spouse or civil partner transfer in full, the combined potential allowance can reach £1 million.

Can a married couple pass £1 million tax-free?

Potentially, yes. If both NRBs and both RNRBs are fully available and the residence conditions are met, up to £1 million can potentially be sheltered from IHT. The RNRB generally requires a qualifying residence to pass to direct descendants.

Does the first parent pay Inheritance Tax?

Often, no IHT is payable when assets pass to a surviving spouse or civil partner because of the spouse or civil partner exemption. The unused allowances can potentially be transferred to the survivor’s estate. Other beneficiaries and transfers can have different IHT consequences.

How can I avoid Inheritance Tax when the second parent dies?

There is no universal method. Legal IHT planning can include lifetime gifts, the 7-year rule, annual exemptions, qualifying gifts from income, trusts, business reliefs, pension planning and life insurance. The suitability of each strategy depends on the family’s circumstances.

What happens to the Nil-Rate Band after the first parent’s death?

Unused NRB can potentially be transferred to the surviving spouse or civil partner. The transferable amount is based on the percentage of the first parent’s NRB that was unused.

Can the Residence Nil-Rate Band be transferred?

Yes, potentially. Any unused RNRB can be transferred to the surviving spouse or civil partner, subject to the statutory conditions. This can allow a qualifying second estate to have up to £350,000 of RNRB.

Does the family home have to pass to children to claim RNRB?

The RNRB generally requires a qualifying residence to pass to direct descendants. Children and grandchildren can fall within the definition, while a transfer to a sibling or niece generally does not satisfy the direct-descendant condition.

What if the second parent’s estate is worth more than £2 million?

The RNRB can be tapered where the relevant estate exceeds £2 million. The reduction is £1 for every £2 above the £2 million threshold.

What if the parent has already downsized?

The RNRB can sometimes still be available under the downsizing provisions where a person has moved to a less valuable property or sold their home and the relevant conditions are satisfied. The calculation can be technical and depends on the timing of the disposal and what assets pass to direct descendants.

How long does a parent have to live after making a gift to avoid IHT?

A potentially exempt gift generally becomes exempt if the donor survives seven years after making it, subject to the relevant IHT rules. Gifts made within seven years of death may need to be considered when calculating the estate’s IHT position.

When must the estate pay Inheritance Tax?

For most IHT, payment is generally due by the end of the sixth month after the month of death. Interest can apply after the relevant payment deadline. Certain assets can qualify for payment by instalments.

Should I get professional advice when the second parent dies?

Yes, particularly for larger or complex estates. Professional advice can help identify transferable allowances, lifetime gifts, RNRB, trusts, business reliefs, property ownership issues and reporting requirements before the estate is finalised.

For a significant estate, consider obtaining advice from a STEP-qualified estate-planning or probate professional, solicitor, or appropriately authorised financial adviser, alongside tax advice where required. An HMRC IHT calculator can also provide an initial estimate, but it does not replace advice on a complex estate.