The decision to hold a property as joint tenants or as tenants in common is sometimes presented to clients as a conveyancing detail to be resolved with a tick on a TR1 form. For most couples that framing understates the structural significance for an inheritance tax estate plan. The joint-tenancy survivorship mechanic and the tenancy-in-common devise-by-will mechanic produce different routes through the IHT regime, with the practical consequences being most visible on a consolidated second-death estate that approaches or exceeds the £2 million residence-nil-rate-band taper threshold.

This page sets out the structural choice in IHT lens, working through the s.18 spouse exemption, the first-death nil-rate band, the transferable NRB and transferable RNRB mechanics, the £2 million taper trap, and the s.142 deed-of-variation route as a post-death corrective. The companion IHT spouse exemption second-death window page covers the second-death calc in detail; this page is the upstream structural-choice page on which the second-death calc depends.

Joint tenancy and the survivorship mechanic

Joint tenancy is undivided ownership: each joint tenant owns the whole property jointly with the other, with no specific share. On the death of one joint tenant the whole property passes automatically to the surviving joint tenant outside the will. The mechanic is called "right of survivorship" or jus accrescendi and is the defining feature of joint tenancy in English and Welsh land law (with equivalent rules in Scotland and Northern Ireland).

For IHT purposes, the position is:

  • The deceased joint tenant's interest forms part of their estate for IHT computation (IHTA 1984 s.5). HMRC's IHTM15040 confirms the working position: the deceased's interest is conventionally valued at 50% of the net equity (or other appropriate share for more than two joint tenants).
  • The transfer of the deceased's interest to the surviving spouse by survivorship is a transfer between spouses; IHTA 1984 s.18 exempts it from IHT.
  • The deceased's nil-rate band is not used on the first death because no IHT is chargeable (the s.18 exemption operates in full). The unused proportion becomes claimable by the surviving spouse's executors on second death under the transferable NRB rules.

The mechanic is conveniently automatic. The surviving spouse takes the whole property without probate of the deceased's interest being needed for that asset (although probate is needed for the rest of the deceased's estate). For most ordinary couples with modest estates, that simplicity is the right answer.

Tenancy in common and devise by will

Tenants in common hold divisible shares. Each share is part of the owner's separate estate; on death it passes by the owner's will (or under the intestacy rules if no will exists). The IHT consequences depend on who the share is left to:

  • Left to the surviving spouse: covered by the s.18 spouse exemption, no IHT on first death, the first-death NRB is unused and transfers to the survivor under s.8A.
  • Left to a non-spouse (children, grandchildren, trust, charity): not within s.18. The transfer uses the deceased's nil-rate band on first death; any value above the NRB (and above any RNRB available) is chargeable to IHT at 40%.
  • Left into a flexible life-interest trust for the spouse with remainder to children: a quasi-spouse exemption applies for the life-interest portion (the trust is a "qualifying interest in possession" under IHTA 1984 s.49 with the spouse exemption applying); the remainder to children is a separate calculation. These trusts (sometimes called immediate post-death interest trusts) are the modern structural alternative to outright spouse-only inheritance.

The flexibility is the upside; the conveyancing complexity (a deed of trust setting out the shares, a Form A restriction on the Land Registry title, a properly drafted will making non-spouse dispositions) is the downside. For couples below the combined £1 million NRB + RNRB threshold the flexibility is rarely worth the complexity. For couples above £2 million, the flexibility is usually load-bearing.

The transferable NRB and the case for joint tenancy

Until 9 October 2007 the unused portion of a deceased spouse's NRB could not be transferred to the survivor. The standard tenancy-in-common-plus-NRB-discretionary-trust planning was widely used to lock in the first-death NRB by directing a share into a trust for children. Since the introduction of the transferable NRB by FA 2008 (inserting IHTA 1984 s.8A), the case for that planning narrowed significantly.

The transferable NRB mechanic works as follows:

  • On the death of the first spouse, the unused proportion of their NRB is calculated. Where 100% of the first-death estate is covered by the s.18 spouse exemption (typical for a couple leaving everything to each other), 100% of the first-death NRB is unused.
  • On the death of the surviving spouse, the executors claim the unused proportion of the deceased's NRB and add it to the survivor's own NRB. At current frozen rates the maximum total NRB on second death is £325,000 + £325,000 = £650,000.
  • The claim is made via HMRC form IHT402 filed with the second-death IHT400. Documentary evidence of the first death and the unused NRB is required.

The transferable NRB closes most of the historical gap between joint-tenancy and tenancy-in-common couples on second-death IHT. The two structures produce equivalent NRB outcomes provided the survivor's executors make the claim on second death. The remaining differences are the RNRB taper (covered below) and the flexibility of redirecting first-death share to a non-spouse on the deed.

The £2 million RNRB taper trap

The residence nil-rate band (currently £175,000 per individual, frozen at this level to April 2030) is reduced by £1 for every £2 by which the net estate at death exceeds £2 million (IHTA 1984 s.8D). The taper is the load-bearing constraint for couples with consolidated estates approaching or exceeding £2 million.

The arithmetic of the taper at the standard frozen amounts:

  • £2,000,000 estate: full £175,000 RNRB (no taper applied yet).
  • £2,350,000 estate: RNRB fully extinguished (the £350,000 excess over £2m has reduced RNRB by £175,000).
  • £2,700,000 estate: also fully extinguished for a couple claiming TRNRB (the £700,000 excess reduces the combined RNRB of £350,000 to zero).

For a joint-tenancy couple the second-death estate is the consolidated value of both estates: everything the first-death spouse owned passes to the survivor under s.18 and is added to the survivor's estate. A couple with a £1.4 million combined estate at first death will typically still have a £1.4 million consolidated estate at second death (allowing for inflation and modest dissipation); both spouses' RNRBs are available and the taper does not bite.

For a couple with a consolidated estate of £2.5 million at second death, the picture is different. The combined RNRB of £350,000 tapers down to nothing under s.8D, and the children inherit a much larger IHT bill than would have been the case with a tenants-in-common structure plus a will that capped the first-death transfer to the survivor at the s.18-exempt level.

Transferable RNRB

Like the NRB, the RNRB transfers between spouses under IHTA 1984 s.8G on a percentage basis. Where the deceased spouse's RNRB was unused (because the family home and all other assets passed under s.18 to the survivor), 100% of the deceased's RNRB is claimable by the survivor's executors on second death. Combined with the survivor's own RNRB, the maximum on second death is £350,000.

The claim is made via HMRC form IHT436. The conditions:

  • The deceased spouse must have died on or after 6 April 2017 (the RNRB introduction date).
  • The surviving spouse's second death must involve a family home that is being closely inherited (passed to lineal descendants).
  • The £2m taper applies to the survivor's second-death estate; where the consolidated estate is in taper territory the transferable RNRB tapers away alongside the survivor's own.

The downsizing addition in IHTA 1984 s.8FA-8FE preserves RNRB where the deceased downsized (or sold) before death, provided the relevant conditions on date and replacement are met. The mechanic comes up regularly for older clients who sold the family home into care funding before death; the downsizing addition can preserve the RNRB on the deceased's estate even though no qualifying residential interest is owned at death.

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Worked example: the Iqbal couple's £1.4m portfolio

Mr and Mrs Iqbal own a family home in Surrey worth £600,000 (no mortgage) and a buy-to-let portfolio of three properties worth £800,000 (gross) with combined mortgages of £200,000, giving £600,000 net BTL equity. The combined net estate at first death is therefore £1.2 million (£600,000 family home plus £600,000 BTL net equity). They have two adult children.

Scenario 1 (joint tenancy throughout). Mrs Iqbal dies first. By survivorship Mr Iqbal takes the family home and the BTL portfolio. The s.18 exemption applies; no IHT on first death; both first-death allowances (NRB and RNRB) are 100% unused and transferable. On Mr Iqbal's second death (assuming the net estate is broadly £1.2m at that point), his executors claim both transferable allowances. The second-death IHT computation:

  • Combined NRB: 2 × £325,000 = £650,000.
  • Combined RNRB (estate below £2m, no taper): 2 × £175,000 = £350,000.
  • Total IHT-free band: £1,000,000.
  • Chargeable second-death estate: £1.2m − £1m = £200,000.
  • IHT: £200,000 × 40% = £80,000.

Scenario 2 (tenants in common throughout, with Mrs Iqbal's will directing 100% of her half of both properties to the survivor). The mechanics are identical to Scenario 1: same s.18 exemption, same transferable allowances, same second-death IHT of £80,000. Below the £2m taper the joint-tenancy and tenants-in-common structures produce equivalent outcomes for the basic-vanilla case.

Scenario 3 (tenants in common, Mrs Iqbal's will directs her £300,000 share of the BTL portfolio to the children outright, balance to the survivor). On first death:

  • £300,000 to children (Mrs Iqbal's half of the BTL net equity): uses Mrs Iqbal's £325,000 NRB, leaving £25,000 of her NRB unused for later transfer.
  • £300,000 to survivor (Mrs Iqbal's half of the family home): exempt under s.18.
  • No IHT due on first death.

On Mr Iqbal's second death the survivor's estate is the £1.2m starting position minus the £300,000 already passed to children at first death, i.e. £900,000. His estate's allowances: his own £325,000 NRB + Mrs Iqbal's transferred unused £25,000 = £350,000 of NRB; his £175,000 RNRB + Mrs Iqbal's transferred £175,000 (unused because her share of the family home went under s.18) = £350,000 of RNRB. Total IHT-free band: £700,000. Chargeable second-death estate: £900,000 − £700,000 = £200,000. IHT: £200,000 × 40% = £80,000. The same total tax.

The Iqbal example shows the structural choice does not move the dial on a £1.2m estate where the £2m taper does not bite. For an estate at £2.3m+ the result would differ significantly because the taper would erode the survivor's RNRB on the joint-tenancy route; the tenants-in-common route holding the survivor's net estate below £2m would preserve the full RNRBs and produce a materially lower second-death IHT bill.

The s.142 deed of variation: post-death rebalancing

Where the wrong structure was in place at first death and the surviving spouse and beneficiaries realise the consequences only after the death, the post-death corrective is the deed of variation under IHTA 1984 s.142. The mechanic is widely used to redirect first-death share (whether received via survivorship on joint tenancy or by will on tenancy in common) to non-spouse beneficiaries, with the redirection treated for IHT purposes as if the deceased had made the redirected disposition.

The conditions:

  • The variation must be in writing, executed within 2 years of the deceased's death.
  • It must be signed by the beneficiaries whose entitlements are being altered (typically the surviving spouse for survivorship redirections).
  • The deed must contain a statement that it is intended to take effect for IHT purposes under s.142(1). Without the statement the deed has no IHT effect (although it may have civil-law effect).
  • For deeds that change the destination of IHT-relevant property the executors must notify HMRC within 6 months of the deed (s.218A).

The standard use for a joint-tenancy couple is for the surviving spouse to vary the deceased's deemed disposition so that part of the property (in value terms) is treated as having passed to children rather than to the survivor. The £325,000 first-death NRB is then used on the children's share; the survivor's estate is correspondingly reduced. For estates that would otherwise be in £2m+ taper territory on second death, the deed of variation is the standard mid-life corrective.

For depth on the deed of variation mechanic, the s.142 conditions, and worked examples on redirected estates, see our deed of variation page. C8 here covers the structural choice that gives rise to the need for the deed; the deed page covers the post-death execution.

The unmarried co-owner contrast

Everything above assumes a married or civil-partner couple within the s.18 spouse exemption. For unmarried co-owners the picture is significantly more constrained:

  • No s.18 exemption. Transfers between unmarried co-owners on death (whether by survivorship for joint tenants or by will for tenants in common) are chargeable transfers, not exempt.
  • NRB and RNRB available against the chargeable transfer. Each cohabitee has their own £325,000 NRB and £175,000 RNRB, applied against any IHT charge on first death.
  • Transferable allowances do not apply. The transferable NRB and transferable RNRB mechanics are reserved for spouses and civil partners under IHTA 1984 s.8A(7) and s.8G; cohabitees cannot inherit unused allowances from the deceased's estate.
  • Lifetime gifting strategies are the standard route. Cohabitees typically rely on lifetime gifting (PETs out of the chargeable estate over the 7-year clock under IHTA 1984 s.3A) plus life insurance written in trust to mitigate the absence of the spouse exemption.

For the broader unmarried co-owner tax position, see our unmarried co-owners page. The contrast is most visible for property-rich cohabitee couples where the £325,000 NRB is small relative to the share value of one cohabitee's interest.

Where this sits in the wider IHT picture

This page is the upstream structural-choice page. Two depth pages on the site work the downstream mechanics:

For the related lifetime strategies, see our 7-year clock and mid-life gifting page, the 2026-onwards IHT decision framework page, and the JT vs TIC general tax-consequence page.

The structural choice is set at acquisition (or at any later severance), but the consequences play out over decades. The right answer depends on the consolidated estate value, the children's expected inheritance pattern, and the proximity to the £2m RNRB taper threshold. For couples with combined estates below £1 million joint tenancy is usually the right answer; above £2 million tenants in common with a properly drafted will is usually the right answer; between £1m and £2m the answer is fact-specific and benefits from modelling.