Worked estates
Inheritance tax on a £1 million estate at the second death
A married couple or civil partners can, between them, pass on a million pounds tax free. The surviving partner’s pension now has to fit inside that figure too.
Inheritance tax on a death from 6 April 2027
£0
The pension does not change the bill for this estate.
| Before 6/4/27 | From 6/4/27 | |
|---|---|---|
| Estate counted | £700,000 | £1,000,000 |
| Tax-free bands used | £1,000,000 | £1,000,000 |
| Inheritance tax at 40.0 % | £0 | £0 |
| of which on the pension | £0 | £0 |
| Heirs’ income tax on the pension | £134,934 | £134,934 |
| Each of 2 heirs keeps | £432,533 | £432,533 |
Of each £100 of pension passed on, tax takes £45 from April 2027, against £45 before.
Residence band £350,000. Estimate only, not advice.
When the first spouse or civil partner dies and leaves everything to the other, nothing is taxed and none of their bands is used. At the second death the survivor's estate can claim the unused percentage of both: twice the nil-rate band and twice the residence band, £1,000,000 in all when the family home goes to children or grandchildren. Take a widow with a £550,000 house, £150,000 in savings and £300,000 left in a pension. On a death before 6 April 2027 the estate is £700,000 and owes nothing. From that date the pension is added, the estate reaches £1,000,000 and the tax is still nil, but the whole double allowance is used up. If the pot holds £450,000 instead, the second estate owes £60,000, and £23,478 of it is attributed to the pension. The figure of a million only holds when every band passed across in full and the estate stays below £2,000,000.
Law read and sums checked by Radif Partners · Editorial policy · How the tax is worked out
Two sets of bands, claimed once
A transfer between spouses is not automatic money in the bank: it is a percentage carried forward. HMRC's guidance on transferring the unused threshold says the unused share of each band at the first death is added to the survivor's own band at the second, at the rates in force then. With the bands frozen until 5 April 2031, a full transfer gives £650,000 of nil-rate band and up to £350,000 of residence band. The residence part still depends on the home, or the money from its sale under the downsizing rules, going to direct descendants. GOV.UK applies the rate of 40 % to anything above the combined total.
The survivor's pot at different sizes
A survivor often still holds a pension at the second death. Under section 150A, that unused pot now joins the survivor's estate. The table holds the house and savings of the example and changes the pension.
| Survivor’s pension | Second estate | Bands used | Inheritance tax | Each of two children keeps |
|---|---|---|---|---|
| £200,000 | £900,000 | £1,000,000 | £0 | £405,033 |
| £300,000 | £1,000,000 | £1,000,000 | £0 | £432,533 |
| £400,000 | £1,100,000 | £1,000,000 | £40,000 | £443,306 |
| £500,000 | £1,200,000 | £1,000,000 | £80,000 | £455,033 |
| £700,000 | £1,400,000 | £1,000,000 | £160,000 | £480,533 |
The bands do not stretch: once the estate passes £1,000,000, each further pound of pension is taxed. The last column also takes off the children's income tax on the pension, which applies because the death is at 78.
The example, line by line
The calculator opens on this case. The ledger repeats it with the same inputs: widowed, full transfer, £550,000 home to two children who each earn £45,000.
| Death before 6 April 2027 | Death from 6 April 2027 | |
|---|---|---|
| Estate counted for inheritance tax | £700,000 | £1,000,000 |
| Nil-rate band and residence band used | £1,000,000 | £1,000,000 |
| Inheritance tax | £0 | £0 |
| of which on the pension | £0 | £0 |
| Income tax paid by the heirs on the pension | £134,934 | £134,934 |
| Each of 2 heirs keeps | £432,533 | £432,533 |
A first death long ago
The residence band only began on 6 April 2017, yet a survivor whose partner died earlier is not left out. HMRC treats the whole of the late partner's residence band as unused in that case, unless their own estate was above £2,000,000. The executors still have to make the claim and show the home passing to descendants at the second death.
Where a pension from the first death ends up
A pension left to the surviving partner is exempt at the first death under section 69 of the Act. If the survivor keeps it invested, it sits in their estate at the second death. The spouse page follows that route, the transferable band guide covers partial transfers and old deaths, and the £2,000,000 page picks up where the taper begins. Executors, a solicitor or a regulated adviser check the transfer claim and the figures for an actual estate.