Understanding inheritance tax when the second parent dies is essential for families managing their financial legacy.
At this stage, the full value of the estate becomes subject to tax assessment, making it crucial to know how thresholds, exemptions and reliefs apply.
With UK tax laws constantly evolving, proper estate planning can significantly reduce the burden on beneficiaries.
This guide explains everything from nil rate bands to probate requirements, offering clarity and up-to-date information based on 2025 regulations and expert insights.
What Is Inheritance Tax?
Inheritance Tax (IHT) is a levy imposed by the UK government on the estate of a deceased person. The estate includes all property, possessions and money left behind.
The tax applies when the value of the estate exceeds a certain threshold known as the nil rate band. For 2025, this threshold remains £325,000 for individuals.
The tax is paid to HM Revenue & Customs (HMRC) and typically applies to the portion of the estate that exceeds the tax-free allowance.
However, not all estates are liable, thanks to available exemptions and reliefs. Married couples and civil partners often have the opportunity to transfer unused tax allowances, potentially doubling the tax-free amount for the surviving partner.
Inheritance Tax only affects estates above the tax thresholds, but understanding how it works is essential for families planning their financial future.
This is especially true after the second parent dies when the estate is finally assessed in full and liabilities to HMRC must be settled.
Estate planning plays a significant role in managing Inheritance Tax, and with careful preparation, it may be possible to significantly reduce or avoid tax burdens for beneficiaries.
This includes making lifetime gifts, writing a will and understanding how the residence nil rate band can apply to family homes.
How Is Inheritance Tax Calculated in the UK?
Inheritance Tax in the UK is calculated based on the value of the deceased person’s estate after deducting allowable thresholds, exemptions and liabilities.
The standard rate of inheritance tax is 40 percent and applies to the portion of the estate that exceeds the nil rate band.
The basic nil rate band remains at £325,000 for 2025. If an estate is worth less than this, no tax is due. However, estates that include a family home being passed on to direct descendants may benefit from the residence nil rate band, which offers an additional allowance.
Calculation Process
- Determine the gross value of the estate
- Subtract debts, liabilities and funeral expenses
- Deduct the nil rate band (£325,000) and residence nil rate band (up to £175,000 if eligible)
- Apply the 40 percent tax rate on the remaining value
The available reliefs can reduce the effective tax burden significantly. For example, if a person leaves their estate to their spouse or a charity, those portions are generally exempt from IHT.
Also, if 10 percent or more of the estate is left to a registered charity, the tax rate may reduce from 40 percent to 36 percent.
Careful calculation is essential, and professional advice can ensure that all applicable deductions are made correctly. Misreporting or overlooking deductions can result in higher tax bills or even penalties from HMRC.
How to Manage Inheritance Tax When Second Parent Dies?
The death of the second parent marks the point at which inheritance tax usually becomes payable. This is because, in most cases, assets transferred between spouses during the first death are tax-exempt. The entire estate now falls under full tax scrutiny.
At this stage, all accumulated assets, including property, investments and savings, are assessed together. HMRC expects the estate’s executor to declare the total value and determine how much tax is owed, if any.
The inheritance tax bill depends on several factors:
- Total value of the estate
- Whether nil rate band and residence nil rate band apply
- Use of gifts and trusts during lifetime
- Whether charitable donations were made
- Availability of spousal transfer allowances
Any mistakes made during the earlier inheritance process, such as missing lifetime gifts or not claiming transferable allowances, can result in overpaying tax.
Key Aspects to Address at This Stage
- Verify eligibility for the residence nil rate band
- Ensure any trust arrangements or lifetime gifts are correctly declared
- Consider whether the estate qualifies for the reduced 36 percent IHT rate due to charitable giving
- Submit accurate and complete documentation to HMRC
If the estate cannot cover the IHT liability immediately, it may be possible to arrange payment in instalments, especially for property-based estates. However, interest charges may apply if full payment is not made within six months of death.
What Happens to an Estate After the Second Parent Passes Away?
When the second parent dies, the process of dealing with their estate becomes a critical moment for families. At this point, the entire estate is considered for inheritance tax, as the automatic exemptions between spouses no longer apply.
During the first parent’s death, if everything was left to the surviving spouse or civil partner, no Inheritance Tax was typically due. However, on the second death, the total value of the estate, including any transfers made after the first parent’s death, is reviewed.
The executor or administrator is responsible for identifying the estate’s value, applying any available tax reliefs or exemptions, and settling the IHT bill with HMRC. This includes:
Key Responsibilities After the Second Death
- Valuing all assets including property, investments and personal belongings
- Deducting debts and liabilities from the total value
- Calculating the total estate value and IHT due
- Applying for probate to distribute assets to beneficiaries
- Paying IHT within six months of the death to avoid interest charges
What Is the Nil Rate Band?
The nil rate band is the amount up to which an estate has no inheritance tax liability. For 2025, this threshold is fixed at £325,000. This allowance is applied before the 40 percent IHT rate is imposed on the remaining estate value.
Every individual in the UK has this allowance. If they do not use all of it on the first death, the remaining portion can usually be transferred to a surviving spouse or civil partner. This transfer can result in a combined nil rate band of up to £650,000 on the second death.
How It Works in Real Scenarios?
- Parent A dies and leaves everything to Parent B: No IHT due, as it’s spouse exempt
- Parent B dies later, their estate gets £325,000 personal nil rate band plus £325,000 unused from Parent A
- Combined nil rate band = £650,000, meaning no IHT is payable unless the estate exceeds this
This transfer is not automatic. It must be claimed by the executor through HMRC using form IHT402 within two years of the second death.
Documentation such as the first spouse’s death certificate and details of the estate left must be submitted as evidence.
Understanding and utilising the nil rate band effectively can save beneficiaries from paying tens or hundreds of thousands in tax. It remains a central feature of tax planning after the second parent dies.
Can the Nil Rate Band Be Transferred Between Spouses?
Yes, the unused portion of the nil rate band can be transferred from one spouse or civil partner to the other upon death. This is a key provision in UK inheritance tax law and is widely used in estate planning strategies.
When one spouse dies and leaves their entire estate to the surviving spouse, no IHT is payable. As a result, their nil rate band is unused.
This unused allowance can be passed to the surviving spouse and added to their own nil rate band when they pass away.
This is known as the transferable nil rate band and must be claimed by the personal representative of the second estate.
To Claim the Transfer
- The deceased’s representative must complete HMRC form IHT402
- It must be submitted with the IHT400 (main inheritance tax return)
- It should be done within two years of the second death
It’s worth noting that the percentage of the unused nil rate band is transferred, not a fixed amount. If the first spouse used up 25 percent of their allowance, 75 percent remains transferable.
Proper documentation is essential to make this claim. Executors should maintain accurate records from the first death, including the will and probate documents, as these will be needed by HMRC.
This transfer can significantly increase the tax-free threshold and should always be considered during estate planning and administration.
How Does the Residence Nil Rate Band Affect Your Tax Liability?
The residence nil rate band (RNRB) is an additional inheritance tax allowance introduced to help families pass on their homes to direct descendants. For 2025, the maximum RNRB remains at £175,000 per individual, or £350,000 for couples.
This allowance applies only if the deceased owned a qualifying residential property and it is passed on to direct descendants, such as children or grandchildren.
If the estate exceeds £2 million, the RNRB begins to taper down and is lost entirely if the estate is above £2.35 million.
Conditions for Applying RNRB
- The deceased must have lived in the property at some point
- The property must be inherited by direct descendants
- The estate must not exceed £2.35 million
If the first parent did not use their RNRB, the unused portion can be transferred to the surviving partner, similar to the nil rate band. This can provide a combined RNRB of up to £350,000 in addition to the standard £650,000 nil rate band.
Key Points
- Total potential IHT-free threshold = £1 million for a couple with property
- The allowance is not available if the property is left to someone who is not a direct descendant
- Downsizing relief may apply if the property was sold before death
This makes planning crucial. Wills should be updated to reflect property inheritance intentions, and executors should be careful to include claims for both RNRB and transferred RNRB where applicable.
Do You Always Need Probate When a Parent Dies?
Probate is often required after the death of a parent, especially if the estate includes property or bank accounts in their name only.
It is the legal process that gives the executor the authority to access, manage and distribute the deceased person’s estate.
However, whether probate is required depends on the type and value of the assets left behind. For example, if assets were jointly owned or if the estate is very small, probate may not be necessary.
Probate is Usually Required When
- The estate includes property held solely by the deceased
- Financial institutions ask for probate before releasing funds
- The estate is over a certain value, typically more than £5,000
If everything was jointly owned with the surviving spouse, probate may not have been needed after the first parent’s death. However, after the second parent passes, probate is almost always necessary, as assets now need to be transferred to the final beneficiaries.
Steps to Obtain Probate
- Submit a probate application online or by post
- Pay the probate application fee (as of 2025, £273 in England and Wales)
- Provide a copy of the will (if available) and the death certificate
- Wait for probate to be granted before distributing the estate
Probate also plays a key role in calculating inheritance tax. Without it, the estate cannot be formally valued or assessed by HMRC. It acts as the legal gateway to executing the wishes outlined in the will and ensuring all tax obligations are met.
Are There Legal Ways to Reduce Inheritance Tax on the Second Death?
Yes, there are several legitimate ways to reduce the inheritance tax liability on the second death.
These methods typically involve long-term planning and a sound understanding of available reliefs and exemptions. It’s essential that any steps taken comply with HMRC guidelines to avoid penalties.
Some Legal Strategies Include
- Making lifetime gifts: Gifts given more than seven years before death are usually exempt from IHT. This includes cash, property, or valuable items.
- Using annual exemptions: Individuals can gift up to £3,000 each tax year without it counting towards their estate. This can be carried over one year if unused.
- Leaving money to charity: If at least 10 percent of the estate is donated to a registered charity, the IHT rate can reduce from 40 percent to 36 percent.
- Setting up trusts: Trusts can be used to transfer assets out of the estate, though they are subject to their own set of tax rules.
- Spending the estate: Reducing the estate’s value by using funds during lifetime for care, travel or gifts can also lower the IHT burden.
It’s important to remember that HMRC closely examines gifts made in the seven years before death. These are known as potentially exempt transfers and may become chargeable if the donor dies within that period.
While many strategies are effective, they should be implemented with guidance from tax professionals or solicitors who specialise in estate planning. The law is complex, and errors can result in higher tax bills or complications for beneficiaries.
Conclusion
Dealing with inheritance tax after the second parent dies is a significant task for families in the UK. It involves not only processing grief but also managing the complex legal and financial responsibilities associated with probate, estate valuation, and tax calculations.
Understanding how inheritance tax works, including the use of nil rate bands and residence allowances, can make a considerable difference in the final tax bill.
Planning ahead, keeping proper documentation, and seeking professional guidance are key steps in ensuring that assets are passed on efficiently and legally.
From calculating the value of the estate to paying tax and claiming the correct allowances, each stage has its own set of rules and requirements. Executors must be diligent, especially when managing high-value estates that include property, gifts, and investments.
FAQs
How long do you have to pay inheritance tax after someone dies?
Inheritance tax must be paid within six months of the person’s death. After that, interest will be charged on any unpaid amount.
Can you avoid paying inheritance tax on your parents’ house?
You may avoid paying inheritance tax on your parents’ house if the estate qualifies for the residence nil rate band and the property is passed to direct descendants.
What happens if you don’t pay inheritance tax?
If inheritance tax is not paid, interest and potential penalties may apply. HMRC may also refuse to issue probate until tax is settled.
Can inheritance tax be paid in instalments?
Yes, inheritance tax can be paid in instalments over ten years for certain assets like property, though interest is usually added.
Who is responsible for paying inheritance tax?
The executor or administrator of the estate is responsible for calculating and paying the inheritance tax to HMRC.
Is life insurance included in inheritance tax?
Life insurance is usually included in the estate for inheritance tax unless it is written in trust, in which case it may be exempt.