Inheritance tax threshold UK: what you need to know in 2026

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

The inheritance tax threshold UK figure is £325,000 per person for the 2026/27 tax year. Three allowances set the position for most estates.

• Standard nil rate band (NRB): £325,000 per person in 2026/27, frozen at that level since April 2009.

• Residence nil rate band (RNRB): up to £175,000 per person in 2026/27, only where a home passes to a direct descendant.

• Spouse exemption: unlimited, on anything left to a spouse or civil partner.

Together the two nil rate bands shelter up to £500,000 per person in 2026/27, and up to £1 million for a married couple or civil partners using both in full.

• Standard rate: 40%, on the value above the available threshold.

• Reduced charity rate: 36%, where at least 10% of the net estate is left to charity.

Where a will falls just short of that 10%, a deed of variation signed within 2 years of the death can redirect a legacy to charity and secure the lower rate.

Why is the inheritance tax threshold frozen until 2031?

The £325,000 nil rate band has been frozen since April 2009, and the 2025 Autumn Budget extended that freeze to 5 April 2031. Property values have roughly doubled since 2009 while the threshold has stayed the same, so more estates are pulled into inheritance tax each year without any rule change.

In 2022/23, the most recent year with final data, 4.62% of estates paid inheritance tax. HMRC receipts from inheritance tax reached £8.4 billion in 2024/25.

What is the residence nil rate band for inheritance tax?

The residence nil rate band is a second inheritance tax allowance worth up to £175,000 per person in 2026/27, and it applies only when a home passes to a direct descendant. It sits on top of the £325,000 nil rate band.

The direct descendants condition catches families out. The residence nil rate band is lost if the home passes to a sibling, a niece or nephew, or a friend. HMRC defines a direct descendant as a child, grandchild or more remote descendant, including step-children, adopted and foster children, and children the deceased was appointed guardian for, plus the spouse or civil partner of a child, grandchild or great-grandchild, provided they have not remarried (GOV.UK).

The allowance also tapers away above a £2 million taper threshold of net estate value, reducing by £1 for every £2 the estate is worth above that figure (GOV.UK).

For the taper, the direct descendants test and downsizing relief in full, read the guide on the residence nil rate band.

How do unused allowances transfer between spouses?

Unused allowances transfer to the surviving spouse as a percentage, and the executor of the second estate has to claim them. That transfer turns £500,000 into £1 million for a married couple, and it is not automatic.

When the first spouse dies, anything left to the surviving spouse is exempt, leaving that spouse's nil rate band and residence nil rate band unused. On the second death, the survivor's estate claims both sets: £325,000 plus £325,000 plus £175,000 plus £175,000, which is £1 million where the family home passes to direct descendants.

• Form IHT402: transfers the unused nil rate band from the first spouse.

• Form IHT436: transfers the unused residence nil rate band.

• Claim deadline: two years from the second death, after which the relief can be lost.

The rules are backdated, so a first death many years ago still counts, based on the percentage of that nil rate band left unused at the time.

What counts towards the estate for inheritance tax?

The calculation includes everything the deceased owned at the date of death, plus some gifts made within seven years, less allowable debts and funeral expenses.

Counted in:

• Property, the main residence and any others

• Cash, bank accounts, savings and investments

• Personal possessions, vehicles and jewellery

• Business interests and partnership shares, subject to business relief

• Life insurance policies not written in trust

• Certain gifts made within seven years of death

Not counted:

• Anything passing to a spouse or civil partner

• Gifts to registered charities and some national institutions

• Life insurance policies written in trust for named beneficiaries

• Most defined contribution pensions, for deaths up to 5 April 2027

Debts, reasonable funeral expenses and the costs of administering the estate are deducted before the tax is calculated. Work through how to value an estate for probate before filing anything with HMRC.

Do gifts made before death count towards inheritance tax?

Gifts made more than seven years before death are outside the estate entirely. Gifts made within seven years are potentially exempt transfers, added back into the calculation if the giver dies inside that window.

If a gift pushes the estate above the nil rate band, tax is payable on the excess. Taper relief then cuts the rate on the gift, not the value counted in the estate.

• 0 to 3 years between gift and death: 40%, the full rate

• 3 to 4 years: 32%, tapered

• 4 to 5 years: 24%, tapered

• 5 to 6 years: 16%, tapered

• 6 to 7 years: 8%, tapered

• 7 years or more: 0%, outside the estate

Some gifts are always exempt regardless of timing: the £3,000 annual gift allowance, small gifts of up to £250 per person per year, wedding gifts of £5,000 to a child and £2,500 to a grandchild, regular gifts out of surplus income and gifts to charities.

HMRC routinely asks about gifts made in the seven years before death, and poor records can mean tax on gifts that would otherwise have been exempt. See the 7 year rule for inheritance tax.

What inheritance tax changes took effect in April 2026?

Two reliefs for business and agricultural assets were cut from 6 April 2026, hitting larger estates rather than typical ones.

• Business and agricultural property relief cap: £2.5 million per person combined, from 6 April 2026, with 100% relief up to that figure.

• Relief above the cap: 50%, an effective inheritance tax rate of 20%.

• Transferable cap for a couple: £5 million of qualifying assets, where both spouses' allowances are used.

• AIM shares relief: 50% from 6 April 2026, cut from 100% after the previous two-year holding period, an effective 20% rate on holdings above the £2.5 million allowance.

Before April 2026, qualifying business and agricultural property received 100% relief without limit, and many investors held Alternative Investment Market shares for it. A plan put in place before October 2024 may no longer produce the outcome it was designed for, so take advice if the estate relied on these reliefs.

How does the April 2027 pension change affect inheritance tax?

From 6 April 2027, most defined contribution pensions will be included in the estate for inheritance tax. For deaths up to 5 April 2027, most pensions pass outside the estate through the scheme's discretionary trust structure.

After April 2027, pension values will also count towards the £2 million residence nil rate band taper threshold, so estates now below it may lose some or all of that allowance. The Office for Budget Responsibility forecasts the change will lift the share of estates paying inheritance tax from around 5% to around 8%.

The change is not in effect yet. Given the seven-year rule on gifts, anyone with significant pension savings should raise it with a solicitor or financial adviser well before then. The detail for executors is in the guide on defined contribution pensions and inheritance tax.

When does the estate have to pay inheritance tax?

Inheritance tax is due by the end of the sixth month after the month of death, so a death in December 2025 means payment by 30 June 2026. The executor or administrator pays it out of the estate, not the beneficiaries.

That deadline creates a cashflow problem. The executor often cannot reach the estate's assets, particularly property, until probate is granted, but probate usually cannot be granted until some inheritance tax has been paid. If the process is new to you, start with what is probate and check how long does probate take.

• HMRC direct payment scheme: banks and building societies pay the tax straight from the deceased's account to HMRC before probate.

• Instalment option: 10 annual instalments, for assets that cannot easily be sold such as property, business interests and certain shares, with interest charged on the balance.

• Bridging or estate loan: from specialist lenders, where the estate's cash position rules out the other two routes.

Interest runs on unpaid inheritance tax from the due date. As of August 2026, HMRC charges 7.75% on late-paid inheritance tax, a rate set from 9 January 2026 and well above most commercial borrowing rates (GOV.UK).

Do you need to worry about inheritance tax on this estate?

If the deceased was single and the estate is below £325,000 after debts, there is no inheritance tax to pay. For a married couple or civil partners with unused allowances, the combined threshold can reach £1 million in 2026/27.

Take advice if the estate is near or above that threshold, or if there are business assets, AIM shares, substantial pensions or gifts in the last seven years. On a £1 million estate, the gap between a well-managed and a poorly-managed position can easily be £50,000 to £100,000 in tax. You also need to tell the tax office about the death, covered in how to notify HMRC after a death.