Inheritance Tax Threshold UK: Nil Rate Bands Explained

What is the inheritance tax threshold?

The inheritance tax threshold — also called the inheritance tax limit — is £325,000 per person. This is the inheritance tax nil rate band. HMRC charges the inheritance tax rate 40% on the portion of your estate above this amount. A residence nil rate band of £175,000 can raise the threshold to £500,000.

Fewer than one in twenty UK estates face an inheritance tax charge. Yet the tax can take 40% of everything above the inheritance tax threshold.

For the 2026/27 tax year, that threshold stands at £325,000. It has not moved since April 2009, and the freeze extends until April 2031.

How much is the inheritance tax threshold matters because house prices have roughly doubled during that freeze. More ordinary families now cross the line without any real increase in wealth.

Two nil rate bands set how much can you inherit tax free UK wide. The standard band covers every estate; the residence band adds relief when a home passes to children or grandchildren.

Combined, these bands raise the effective inheritance tax threshold to £500,000 per person. Married couples and civil partners can double that by transferring unused allowances.

A qualifying couple may shelter up to the £1 million inheritance tax threshold entirely. Reaching this figure requires specific conditions, which this guide explains.

Below you can find detail on the nil rate band, RNRB, couples’ allowances, IHT calculation, and the 2026 changes. For broader context on rates and reliefs, the inheritance tax guide covers the full picture.

The Nil Rate Band Is £325,000

Every individual receives an inheritance tax £325,000 nil rate band. HMRC charges IHT only on the portion of an estate above this amount.

For 2026/27, the IHT threshold stays at £325,000. The November 2025 Budget extended the freeze to April 2031.

Assets left to a spouse or civil partner fall outside the calculation. The inheritance tax spouse exemption covers transfers between partners in full.

There is no upper limit on the spouse exemption. This means a surviving partner can inherit the entire estate without incurring any IHT charge.

Suppose your estate totals £450,000 after debts. Only the £125,000 above the nil rate band is taxed.

At the standard inheritance tax rate of 40%, that excess produces a charge of £50,000. Leaving 10% of the taxable estate to charity reduces the rate to 36%.

Charitable gifts also lower the taxable total. This double benefit makes charitable legacies one of the simplest forms of IHT planning.

Had the inheritance tax threshold frozen figure kept pace with inflation, it would sit nearer £525,000 today. Instead, the standstill drags more estates into IHT each year.

Residence Nil Rate Band Explained

The residence nil rate band (RNRB) adds £175,000 of inheritance tax relief. It applies when your main home passes to direct descendants on death.

Direct descendants include children, stepchildren, adopted children, foster children, and grandchildren. Nieces, nephews, and siblings do not qualify for the RNRB.

Combined with the NRB, the RNRB raises the effective inheritance tax threshold UK homeowners can access to £500,000. This applies only to those leaving property to the next generation.

A taper reduces the RNRB for estates above £2 million. It falls by £1 for every £2 over that level.

For one person, the RNRB reaches zero at £2.35 million. HMRC calculates the taper on gross estate value before deducting debts.

Even if mortgages bring net worth below £2 million, the gross figure still applies. This catches some homeowners in high-value areas by surprise.

Both the RNRB and its taper are frozen until April 2031. Downsizing relief may preserve the RNRB if you moved to a smaller home before death.

HMRC’s RNRB guidance sets out all qualifying conditions. Estates near the £2 million taper point should check eligibility carefully.

Threshold for Married Couples

The inheritance tax threshold for married couples and civil partners can reach £1 million. Unused nil rate bands transfer between spouses on death.

When the first spouse leaves everything to the survivor, the spouse exemption covers the transfer. Both the £325,000 NRB and £175,000 RNRB remain unused.

On the second death, the estate claims a combined NRB of £650,000 and RNRB of £350,000. The transferable nil rate band doubles the effective inheritance tax limit.

Here is how this works in practice with a £900,000 estate:

• Estate value after debts: £900,000.
• Combined NRB from both spouses: £650,000.
• Combined RNRB (home left to children): £350,000.
• Total threshold: £1,000,000.
• Taxable amount: £0 — the estate falls within the combined inheritance tax limit.

If that same estate were worth £1.1 million, only £100,000 would be taxable. At 40%, the IHT charge would be £40,000.

Reaching the inheritance tax threshold for couples at the full £1 million requires the home to pass to direct descendants. An executor must claim the transfer within two years.

HMRC’s guidance on transferring unused thresholds explains the process step by step. Inheritance tax allowance married couples can use requires no complex structures.

How to Calculate Inheritance Tax

Working out how much is inheritance tax threshold liability starts by adding up the gross estate value. This covers property, savings, investments, and possessions.

Subtract debts, funeral costs, and exempt transfers. Measure the net estate value against the available nil rate bands.

Any estate below the threshold of £325,000 pays no tax. Amounts above face the 40% charge.

HMRC’s online estate value tool checks whether IHT may be due. An inheritance tax calculator gives a rough starting figure for simpler estates.

Gifts made within seven years before death may be added back. The IHT annual exemption of £3,000 per tax year is excluded from this calculation.

Unused annual exemption carries forward once, giving a maximum of £6,000. Keeping a record of all gifts is essential for accurate reporting.

From April 2027, unused pension pots are expected to count towards the estate value inheritance tax calculation. This could push many moderate estates above the threshold for the first time.

Changes Taking Effect from 2026

Several inheritance tax changes 2026 brought into effect from 6 April reshaped IHT for business and farm owners. Core nil rate bands stayed the same.

Key changes for the 2026/27 tax year are set out below:

• Agricultural Property Relief and Business Property Relief are capped at £2.5 million per person for full relief.
• Relief above £2.5 million drops to 50%, creating an effective 20% IHT rate on the excess.
• AIM-listed shares now attract only 50% business property relief at any value.
• Unused APR/BPR allowance at the 100% rate is transferable between spouses on death.

Couples can combine allowances to shelter up to £5 million of qualifying business and agricultural property. This spousal transfer mirrors the nil rate band approach.

Inherited pension pots are expected to enter the IHT net from April 2027. Forward planning under the IHT nil rate band 2026 framework is now essential for pension holders.

Inheritance tax threshold 2026 figures stay at £325,000 and £175,000. Farmers, business owners, and pension holders face the greatest impact from these reforms.

Reduce Your Inheritance Tax Bill

Legitimate inheritance tax planning can lower what your estate pays. Several inheritance tax exemptions exist, each with defined rules.

The inheritance tax gift allowance lets you give £3,000 per tax year free of IHT. Gifts to a spouse are exempt with no cap.

Wedding gifts from a parent qualify for up to £5,000 separately. Regular gifts from surplus income are also exempt if they come from normal earnings.

Gifts above the annual exemption become potentially exempt transfers. Survive seven years, and inheritance tax on gifts no longer applies.

Trusts, charitable legacies, and life insurance in trust offer further ways to reduce inheritance tax. The wider inheritance tax guide covers taper relief details.

Professional advice suits estates approaching the threshold. Acting early gives the widest range of options for inheritance tax relief.

The inheritance tax threshold married couples share can shelter significant wealth. Reviewing your allowances now ensures nothing is overlooked.

Paying Inheritance Tax to HMRC

An executor — or estate administrator where no testament exists — pays IHT from the estate. Beneficiaries are not personally liable for the charge.

HMRC sets a deadline of six months after the end of the month of death. Interest accrues on any late balance.

IHT on land and buildings can be paid in annual instalments over ten years if the asset stays unsold. Only certain qualifying assets attract this option.

The Direct Payment Scheme lets executors pay from the deceased’s bank accounts before probate. This removes the need to source funds elsewhere.

Income generated by inherited assets afterwards is taxed under standard income tax rules. Rental income from a property, for example, creates an income tax liability for the beneficiary.

The inheritance tax threshold property owners face is the same as for any other asset. IHT on the estate is paid from its funds, not by the person receiving the property.

Executors should gather valuations for all assets early. This speeds up the payment process and reduces the risk of penalties from HMRC.

What to Do Next

The inheritance tax threshold sets whether your estate faces a 40% charge. For 2026/27, the nil rate band stays at £325,000 and the RNRB at £175,000.

Both remain frozen until April 2031. Couples who plan ahead can protect up to £1 million from IHT.

Using annual gift exemptions, keeping accurate records, and reviewing your arrangements after the April 2026 changes are practical first steps. Acting sooner gives more options than acting later.

Changes to pension rules from April 2027 add further urgency. Reviewing your estate position now can prevent surprises for your family.

If your estate approaches the threshold, a qualified tax adviser can identify reliefs you may be missing.

Key Takeaways

Points covered in this guide:

• The inheritance tax threshold (nil rate band) is £325,000 per person for 2026/27, frozen since 2009 and confirmed until April 2031.
• A residence nil rate band of £175,000 applies when your home passes to direct descendants, raising the individual threshold to £500,000.
• Married couples and civil partners can transfer unused bands for a combined threshold of up to £1 million.
• From April 2026, agricultural and business property relief is capped at £2.5 million for full relief, and pensions enter the IHT net from April 2027.
• IHT is charged at 40% above the threshold, or 36% if at least 10% of the taxable estate goes to charity.

Every figure in this guide reflects the 2026/27 tax year. Verify each number against GOV.UK before acting.

Inheritance Tax Threshold FAQs

Below are answers to common questions about the inheritance tax threshold. Each answer uses the 2026/27 tax year figures.

What is the inheritance tax threshold in the UK for 2026/27?

The nil rate band for 2026/27 stands at £325,000 per individual. Estates valued below this figure pay no IHT.

A separate residence nil rate band of £175,000 can apply to homeowners passing property to children or grandchildren. Both bands are fixed at current levels until April 2031.

How much is the inheritance tax threshold for married couples?

A surviving spouse or civil partner can inherit the unused portion of their late partner’s nil rate bands. If neither allowance was used on the first death, the second estate may claim up to £650,000 in NRB and £350,000 in RNRB.

This gives a joint total of £1 million, provided the family home passes to direct descendants. The executor must file the relevant claim with HMRC.

What is the residence nil rate band?

It is a supplementary £175,000 IHT allowance introduced in April 2017. You qualify if your main home forms part of your estate and is left to a direct descendant.

For estates exceeding £2 million in gross value, the allowance is gradually withdrawn. HMRC reduces it by £1 for every £2 above that limit.

What inheritance tax changes took effect from April 2026?

Full 100% agricultural and business property relief is now restricted to the first £2.5 million of qualifying assets per person. Anything above that figure receives 50% relief instead.

Shares listed on AIM are limited to 50% relief regardless of value. Spouses can transfer unused portions of the £1 million APR/BPR allowance between them on death.

How do I calculate inheritance tax on an estate?

Start by totalling all assets including property, savings, investments, and gifts made in the seven years before death. Deduct any outstanding debts and funeral expenses.

Compare the net total against the nil rate band and RNRB if applicable. HMRC’s online checker can give an initial indication of whether any charge is likely.