CmdrBond

Far be it from me to contradict an HMRC response, however I do not believe they have fully understood the question. Unless there are circumstances that I am unaware of that prevent it, a spouse does not incur IHT on anything they inherit from their partner. Additionally they inherit their partners unused allowances. In theory, if the partner left everything to their spouse, their spouse can inherit both their £325,000 nil rate band allowance AND the £175,000 increase that can be applied when passing property to children (including adopted, fostered or stepchildren) or grandchildren AS LONG AS the entire estate is und £2 million. In theory this means that no IHT could be payable if the estate is £1 million or less - as I understand it.