🏛️ Inheritance Tax planning has many nuances — trusts, business/agricultural relief, lifetime gifts and the seven-year rule can all change the result. This is a simplified estimate; speak to a solicitor or financial adviser for anything beyond a straightforward estate.
Inheritance Tax Thresholds 2026/27
Allowance
Amount
Condition
Nil-rate band (NRB)
£325,000
Every estate — frozen until April 2031
Residence nil-rate band (RNRB)
£175,000
Main home left to direct descendants
Combined (individual)
£500,000
NRB + RNRB
Combined (married couple)
£1,000,000
Both allowances transferred on second death
Above these allowances, Inheritance Tax is charged at 40% (or 36% if at least 10% of the net estate is left to a qualifying UK charity). The Autumn 2025 Budget confirmed all three thresholds are frozen until 5 April 2031.
Worked Example
A single person leaves an estate worth £600,000, including a £300,000 home left to their children. Their nil-rate band is £325,000 and their residence nil-rate band is £175,000 (fully covered by the £300,000 home value), giving a total allowance of £500,000. The taxable estate is £600,000 − £500,000 = £100,000, taxed at 40% = £40,000 Inheritance Tax due.
The Residence Nil-Rate Band Taper
If an estate is worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 over that threshold, and disappears entirely once the estate reaches approximately £2.35 million. Larger estates should factor this taper in carefully.
Upcoming Changes Worth Knowing
From 6 April 2026, agricultural and business property reliefs are subject to a combined £1 million cap for 100% relief (50% relief above that). From 6 April 2027, most unused defined contribution pension pots are due to be brought within the scope of Inheritance Tax for the first time — a significant change for anyone using pensions as part of estate planning.
Frequently Asked Questions
The standard nil-rate band is £325,000 per person, frozen since 2009 and now confirmed frozen until April 2031. An additional £175,000 residence nil-rate band applies when a qualifying home is left to direct descendants — giving up to £500,000 per person or £1,000,000 for a married couple.
40% on the value of an estate above the available nil-rate bands, dropping to 36% if at least 10% of the net estate is left to a qualifying UK charity.
Yes. Any unused nil-rate band and residence nil-rate band can usually be transferred to a surviving spouse or civil partner, potentially doubling the combined allowance to £1,000,000.
The £175,000 residence nil-rate band reduces by £1 for every £2 the net estate exceeds £2 million, and is fully tapered away by roughly £2.35 million.
No. Gifts to a spouse, civil partner or qualifying UK charity are generally exempt regardless of size. Other lifetime gifts can be Potentially Exempt Transfers, falling outside the estate entirely if the donor survives seven years.