Under UK inheritance tax (IHT) rules for 2026/27, it does, but it may be capped. If you are a long-term UK resident and your spouse or civil partner is not, the spouse exemption is generally limited to GBP 325,000 in total rather than being unlimited. If neither of you is a long-term UK resident, or only the receiving spouse is, the cap does not apply, although other conditions and the scope of what is taxable still matter.

How the spouse exemption normally works

Gifts and inheritances between spouses and civil partners are generally exempt from IHT, whatever the amount. That is why many couples leave everything to each other on the first death.

For many individuals, the domestic inheritance tax test now focuses on long-term UK residence rather than domicile. Domicile remains relevant in some treaty, transitional and anti-avoidance contexts. You are generally a long-term UK resident if you were UK tax resident for at least 10 of the previous 20 tax years. After leaving the UK, the status can continue for a tail of between 3 and 10 tax years. The tail depends on your UK tax-residence years, and a split year may count as a full year, so it needs working out against the statutory rules.

When the cap applies

Under section 18 of the Inheritance Tax Act 1984, the exemption is capped where, immediately before the transfer:

  • the person giving or leaving the assets is a long-term UK resident, and
  • the spouse or civil partner receiving them is not

The cap equals the nil rate band at the time of the transfer, currently GBP 325,000. It is cumulative: earlier transfers to the same spouse that used the exemption reduce what is left.

The cap does not apply where:

  • both of you are long-term UK residents
  • neither of you is a long-term UK resident
  • only the receiving spouse is a long-term UK resident

Anything above the cap is not automatically taxed. A lifetime gift above the cap is usually a potentially exempt transfer, taxed only if you die within seven years. On death, the excess is part of your chargeable estate, and your own nil rate band and any residence nil rate band may still be available.

The election option

A spouse who is not a long-term UK resident may choose to be treated as one for IHT. This is a spousal long-term UK residence election. If made, the full spouse exemption may become available.

The trade off can be significant:

  • the electing spouse's worldwide assets come within the UK IHT net
  • the election cannot be revoked
  • it only lapses after the electing spouse has 10 consecutive years of non-UK residence

An election can be made during lifetime or, after the death of the long-term resident spouse, generally within two years of the death. For a spouse with significant non-UK assets, the cost may outweigh the benefit.

Where this matters for expats

Typical situations include:

  • A British national who recently left the UK and is still within their tail period, married to a spouse who has never lived in the UK
  • A couple where one spouse lived in the UK for only a few years
  • A returning expat whose spouse has not built up 10 years of UK residence

For the wider picture, see our guide on inheritance tax for UAE resident UK nationals, and for the residence-based regime, UK non-dom, pension tax rules and overseas trusts.

A worked example

Illustrative example only, not a real client.

Richard was UK tax resident for 25 years and moved to Dubai in 2024. Assuming his tail has not ended, he remains a long-term UK resident. His wife Lina has never been UK resident.

Richard dies in 2026/27 leaving his whole GBP 1,200,000 estate to Lina. Assuming no children, no prior transfers to Lina, no lifetime gifts, no residence nil rate band, no pension death benefits in scope and no other reliefs:

  • Spouse exemption (capped): GBP 325,000
  • Remaining estate: GBP 875,000
  • Less Richard's own nil rate band: GBP 325,000
  • Taxable: GBP 550,000 at 40% = GBP 220,000

If Lina makes a death election within two years, the whole GBP 1,200,000 could be exempt under these assumptions. But her own worldwide assets would then be in the UK IHT net until she has 10 consecutive years of non-UK residence. Whether that is worthwhile depends on her own wealth and plans.

Common mistakes

  • Assuming everything left to a spouse is always IHT free
  • Forgetting that the receiving spouse's residence status, not nationality, is what counts
  • Making an election without weighing the effect on the spouse's own worldwide assets
  • Not checking where you are in your own tail period after leaving the UK

A regulated financial adviser can help. Get in touch for a free introduction.

Sources and further reading

Last reviewed: October 2026. Tax year: 2026/27. Jurisdictions covered: UK, UAE. Rates, legislation and guidance change, so recheck before relying on this. Rules can differ between England and Wales, Scotland and Northern Ireland; tax residence is fact-specific; treaty outcomes depend on residence, domicile or nationality provisions; examples are simplified and omit reliefs, costs, exchange rates and anti-avoidance rules. This is general information, not financial, tax or legal advice. Take advice in the relevant country before acting.