Chapter: 2 - Inheritance Tax Mitigation: The Basics

The spouse/civil partner exemption

2.2.3

The exemption is unlimited except where the donor is UK domiciled and the donee is or is deemed to be non-UK domiciled, in which case there is (rather odd) historic limitation to £55,000, on a lifetime basis (IHTA 1984 s18).  See 13.2 and, for domicile, 15.3 and 16.4.

As to transfers between spouses/civil partners, it has been traditionally axiomatic that on death (and you never know who is going to go first) each individual should own at least £312,000 (for 2008/09) of chargeable value to pass to a beneficiary other than the survivor.  This can be achieved by careful Will drafting – see Chapter 18.  Otherwise the wastage of the exemption could cost up to £124,800 (40% of the nil-rate band).  However, the advent of the transferable nil-rate band from 9 October 2007 (see 18.4.3) makes this unnecessary.