The UK inheritance tax (IHT) nil-rate band in 2026 is £325,000, plus an additional £175,000 residence nil-rate band where you leave your main home to direct descendants. A married couple or civil partners can combine their allowances to pass on up to £1 million tax-free. Anything above the available allowances is taxed at 40%.
The 2026 IHT allowances at a glance
| Allowance | Amount (2026) |
|---|---|
| Standard nil-rate band (per person) | £325,000 |
| Residence nil-rate band (per person) | £175,000 |
| Combined for a single person leaving home to direct descendants | £500,000 |
| Combined for a married couple / civil partners | up to £1,000,000 |
| IHT rate above the available allowances | 40% |
| Reduced rate (10%+ left to charity) | 36% |
The standard nil-rate band (NRB)
Every individual has a basic IHT allowance — the nil-rate band — of £325,000. The value of your estate above this figure is potentially taxable at 40%. The NRB has been at £325,000 since 2009; it has not increased for over fifteen years, even as house prices and asset values have grown considerably.
The NRB applies to the whole estate: the home, bank accounts, investments, pensions in certain circumstances, cars, valuable possessions and everything else of value. Certain gifts made in the seven years before death are also brought back into the calculation (see below).
The residence nil-rate band (RNRB)
Introduced in 2017 and now at £175,000 per person, the residence nil-rate band is an additional allowance available when:
- The deceased owned a main residence (their home, or a share in one), and
- That residence (or its value) passes on death to direct descendants — that is, children, stepchildren, adopted or fostered children, or grandchildren (and their spouses/civil partners).
Where both conditions are met, the RNRB stacks on top of the standard NRB, giving an individual up to £500,000 of allowance, or up to £1 million for a married couple or civil partners.
The £2 million taper
The RNRB tapers away on larger estates. For estates valued over £2 million, the allowance is reduced by £1 for every £2 above the threshold. That means the RNRB is fully tapered away on a single person's estate worth £2.35 million or more, or £2.7 million for a couple. Estates close to the £2 million figure should look carefully at planning options — sometimes a relatively modest gift in lifetime can preserve the full RNRB.
The transferable allowance — how a couple gets to £1 million
When the first spouse or civil partner dies, any unused proportion of their NRB and RNRB is automatically transferred to the survivor and added to the survivor's own allowances on the second death. This is sometimes called the transferable nil-rate band.
So if a husband dies leaving everything to his wife (which is exempt from IHT in any case), his £325,000 NRB and £175,000 RNRB are unused. When she later dies, her executors can claim both her own £500,000 and his £500,000 — up to £1 million total, provided the estate qualifies for the RNRB and is below the £2 million taper threshold.
Spouse and civil partner exemption
Anything passing from one spouse or civil partner to the other — either on death or by lifetime gift — is exempt from inheritance tax altogether, regardless of value. That's why most married couples don't pay IHT on the first death.
There's a limit, though, where one spouse is UK-domiciled and the other is not: the exemption to a non-UK-domiciled spouse is capped (currently £325,000 unless an election is made). This is a specialist area — if it applies to you, get advice.
Gifts and the seven-year rule
Lifetime gifts can reduce the eventual IHT bill, but only if you survive seven years after making them. Outright gifts to individuals are called potentially exempt transfers — they fall outside the estate if you live for seven years; if you die within seven years, they are added back into the IHT calculation, with taper relief reducing the tax (not the gift) on a sliding scale from years 3 to 7.
| Years between gift and death | Tax payable on the gift |
|---|---|
| Less than 3 years | 40% (full rate) |
| 3 to 4 years | 32% |
| 4 to 5 years | 24% |
| 5 to 6 years | 16% |
| 6 to 7 years | 8% |
| 7+ years | 0% |
The annual gift allowances (use them or lose them)
Some gifts are always outside the estate regardless of survival period:
- £3,000 annual exemption — everyone can give £3,000 a year free of IHT. Unused allowance can be carried forward one year.
- Small gifts — £250 per person per year to as many people as you like.
- Wedding gifts — £5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else.
- Gifts to charity, political parties and qualifying bodies — always fully exempt.
- Gifts out of normal expenditure from income — an underused but powerful exemption for regular gifts funded from surplus income (not capital), provided the giver's standard of living is unaffected. Good records are essential.
Worked example — a typical estate
A widow dies in 2026. Her late husband died ten years earlier leaving everything to her. Her estate is worth £900,000, including a £450,000 home left to her two adult children.
- Her own NRB: £325,000
- Husband's unused NRB (transferred): £325,000
- Her own RNRB: £175,000 (home passing to direct descendants)
- Husband's unused RNRB (transferred): £175,000
- Total allowances: £1,000,000
The estate at £900,000 falls below the £1,000,000 of available allowances, so no IHT is payable. The full nil-rate bands cover the estate, and the executors will need to file the IHT400 form with the transferable allowance claim included.
Frequently asked questions
Worried about inheritance tax?
If you think your estate may be taxable, a properly drafted Will and a few simple planning steps can save your beneficiaries significant sums. Call us for a free conversation — we'll tell you honestly whether you need to do anything.