Married couples in England and Wales have access to a combined inheritance tax threshold of up to £1 million — but most never claim it in full. The reason is almost always the same: the family home is held as joint tenants, and the wills do not direct it to children. This single oversight costs families £140,000 or more in avoidable inheritance tax. This article explains the two allowances available to married couples, why most families lose one of them, and the two steps that fix the problem.
The Two Allowances Available to Married Couples
Every individual in England and Wales has two inheritance tax allowances that can be used to shelter their estate from the 40% IHT charge.
- The Nil Rate Band (NRB): £325,000 per person. This is the basic IHT threshold — the first £325,000 of your estate is charged at 0%. The NRB has been frozen at £325,000 since 2009 and is currently frozen until at least 2030.
- The Residence Nil Rate Band (RNRB): £175,000 per person. This additional allowance is available when the family home is left to direct descendants — children or grandchildren — via the will. It was introduced in 2017 specifically to help families pass the family home to the next generation.
- Combined threshold for a couple: £1,000,000. Both the NRB (£325,000 × 2 = £650,000) and the RNRB (£175,000 × 2 = £350,000) transfer to the surviving spouse on the first death — but only if the right conditions are met.
The RNRB is only available if the family home passes to direct descendants via the will. If the home passes by survivorship — because it is held as joint tenants — the RNRB cannot be claimed on that death. This is the most common and most expensive mistake in estate planning.
The Henderson Case Study: £140,000 Saved
Mark (67) and Sue (64) Henderson own their home jointly (value £700,000), have savings of £250,000, and ISAs of £150,000. They have two adult children. Total estate: £1,100,000. Neither has updated their will.
Without Properly Drafted Wills: £180,000 IHT
Mark and Sue hold the home as joint tenants. When Mark dies, the home passes to Sue automatically by survivorship — not via his will. Because the home did not pass via the will, Mark's RNRB (£175,000) cannot be claimed. His NRB (£325,000) transfers to Sue. When Sue later dies: her estate is £1,100,000. She has her own NRB (£325,000) plus Mark's transferred NRB (£325,000) = £650,000 combined NRB. But the RNRB is lost — neither Mark's nor Sue's can be claimed because the home passed by survivorship on Mark's death. Taxable estate: £1,100,000 − £650,000 = £450,000. IHT at 40%: £180,000.
With Properly Drafted Wills: £40,000 IHT
Mark and Sue sever the joint tenancy — they now each own a half-share as tenants in common. Both wills are updated to direct the home to their children. Mark dies: his half-share passes to Sue (inter-spouse exempt, no IHT). His NRB (£325,000) and RNRB (£175,000) both transfer to Sue. When Sue dies: combined NRBs = £650,000; combined RNRBs = £350,000; total threshold = £1,000,000. Taxable estate: £1,100,000 − £1,000,000 = £100,000. IHT at 40%: £40,000. Tax saved by proper wills: £140,000.
Same estate. Same family. Same assets. The only difference is whether the joint tenancy was severed and whether the wills directed the home to children. Two straightforward steps save £140,000.
Why Does the Home Passing by Survivorship Lose the RNRB?
The Residence Nil Rate Band requires the family home to be 'closely inherited' — meaning it must pass to a direct descendant (child, grandchild, or step-child) via the deceased's will or under the intestacy rules. If the home passes by survivorship (because it is held as joint tenants), it does not pass via the will at all. It passes outside the estate entirely. The RNRB condition is not met, and the allowance is lost on that death.
The Three Steps Every Married Couple Must Take
- Sever the joint tenancy — Convert your home from joint tenants to tenants in common. This is done by a simple deed of severance. It does not affect your right to live in the home or your mortgage. It simply means that each of you now owns a distinct half-share that can be directed by your will.
- Update both wills to direct the home to children — Both wills must include a provision directing the home (or the deceased's share of it) to children or grandchildren. This can be done via an outright gift or via a trust that gives the surviving spouse a life interest with the capital passing to children on the second death.
- Ensure the NRBs transfer correctly — On the first death, both the unused NRB and the RNRB transfer automatically to the surviving spouse — but only if the first death's estate is handled correctly. Keep records of the first death's estate and IHT position so that the transferred allowances can be claimed on the second death.
Additional Planning Points for Married Couples
- ISAs lose their tax shelter on death — the value is included in your estate for IHT purposes. Consider spending ISAs before other assets, or using them for gifts to children.
- Lifetime gifts to children start the 7-year clock for Potentially Exempt Transfers (PETs). If you survive seven years after making the gift, it falls outside your estate entirely.
- The RNRB is tapered for estates above £2 million — it reduces by £1 for every £2 of estate above £2 million. For larger estates, additional planning is needed.
- Pension funds are generally outside your estate for IHT purposes — but from April 2027, unspent pension pots will be brought into the IHT net. Review your pension nominations now.
What Does a Pair of Wills Cost?
A pair of mirror wills for a married couple — including the severance of joint tenancy and the correct RNRB provisions — typically costs a few hundred pounds. The tax saving in the Henderson case study is £140,000. The return on investment is extraordinary. Yet millions of couples in England and Wales either have no wills, or have wills that do not include the RNRB provisions — simply because they have never been told about them.