What is the Inheritance Tax threshold 2026/27?

The Inheritance Tax nil-rate band for 2026/27 remains at £325,000. This is the amount you can pass on tax-free when you die. If you leave your home to direct descendants (children, grandchildren), you may also qualify for the residence nil-rate band of £175,000, giving a combined threshold of £500,000 per person. Married couples and civil partners can combine their allowances for up to £1,000,000 tax-free.

How much can a married couple pass on tax-free?

A married couple or civil partnership can pass on up to £1,000,000 tax-free — £325,000 nil-rate band each (£650,000) plus £175,000 residence nil-rate band each (£350,000) if a family home is left to direct descendants. The first spouse to die can transfer any unused allowance to the surviving spouse, so even if the entire estate passes to the surviving spouse (tax-free between spouses), the full combined allowance is available on the second death.

When is Inheritance Tax paid and by whom?

Inheritance Tax must be paid by the end of the sixth month after the person dies. For example, if someone dies in March, IHT is due by 30 September. The executors of the estate (named in the will) or administrators (if there is no will) are responsible for paying IHT from the estate before distributing assets to beneficiaries. IHT on property can be paid in annual instalments over 10 years.

Will the IHT threshold increase?

The nil-rate band has been frozen at £325,000 since 2009 and is now frozen until at least April 2030. The residence nil-rate band has been frozen at £175,000 since 2020/21 and is also frozen until at least April 2030. With rising house prices and asset values, this freeze means more estates are being pulled into IHT each year — a phenomenon known as 'fiscal drag'.

Inheritance Tax Threshold 2026/27 — Nil-Rate Band and Allowances Explained | PocketWise

Inheritance Tax (IHT) is charged at 40% on the value of an estate above the tax-free threshold. Here is how the thresholds work for 2026/27.

IHT Thresholds — 2026/27

Allowance	Amount	Frozen until
Nil-rate band (NRB)	£325,000	April 2030
Residence nil-rate band (RNRB)	£175,000	April 2030
Combined per person	£500,000
Combined for married couple/civil partners	£1,000,000

How the Thresholds Work

Threshold	What it means
Nil-rate band (£325,000)	Every individual can pass on the first £325,000 of their estate tax-free
Residence nil-rate band (£175,000)	Additional allowance if you leave your home (or a share of it) to direct descendants
Total per person	Up to £500,000 tax-free
Transferable to spouse	Any unused NRB and RNRB from the first spouse can transfer to the surviving spouse
Total for a couple	Up to £1,000,000 tax-free
Rate above threshold	40% on everything above the combined thresholds

Who Pays IHT?

Scenario	IHT due?
Estate below £325,000	No IHT
Estate below £500,000 (home left to children)	No IHT (with RNRB)
Married couple, estate below £1 million (home left to children)	No IHT
Estate left entirely to spouse or civil partner	No IHT (spouse exemption — unlimited)
Estate left to a UK charity	No IHT on the charitable portion
Estate above the available thresholds	40% IHT on the excess
Left 10%+ of estate to charity	Reduced rate of 36% instead of 40%

IHT Threshold History

Tax year	Nil-rate band	Residence nil-rate band	Combined (single)	Combined (couple)
2009/10 – 2025/26	£325,000	£0 (before 2017/18) / £175,000 (from 2020/21)	£325,000–£500,000	£650,000–£1,000,000
2026/27	£325,000	£175,000	£500,000	£1,000,000
2027/28–2029/30	£325,000 (frozen)	£175,000 (frozen)	£500,000	£1,000,000

The nil-rate band has not increased since 2009 — 17 years of frozen thresholds.

Residence Nil-Rate Band — Conditions

You only qualify for the RNRB if:

Condition	Detail
Leave your home	Your main residence (or a share of it) must pass on death
To direct descendants	Children (including adopted, step, and foster children), grandchildren, or their spouses
Not to siblings, friends, etc.	Leaving your home to anyone other than direct descendants means no RNRB
Property downsizing	If you downsized or sold your home after 8 July 2015, you may still qualify for a “downsizing addition”

RNRB Taper for Large Estates

Estate value	RNRB available
Up to £2 million	Full £175,000
£2 million – £2.35 million	Reduced — tapers by £1 for every £2 above £2 million
Over £2.35 million	£0 — RNRB fully tapered away

For couples, the taper applies to the estate of the second spouse to die.

Transferring Unused Allowance to a Spouse

Scenario	What transfers
First spouse used none of their NRB	100% of NRB transfers (£325,000)
First spouse used half their NRB	50% transfers (£162,500)
First spouse left everything to surviving spouse	100% of both NRB and RNRB transfer
First spouse died before RNRB existed (pre-2017)	Still can transfer 100% of RNRB to surviving spouse

Key point: Even if the first spouse used all their allowance on their death (e.g. left assets to children), only the unused portion transfers. Planning which spouse leaves what to whom is important.

What’s Included in the Estate?

Included	Not included
Property (main home and other property)	Assets left to a spouse or civil partner
Savings and investments	Assets left to a qualifying UK charity
Personal possessions (car, jewellery, art)	Business Property Relief (BPR) qualifying assets
Life insurance payouts (unless in trust)	Agricultural Property Relief (APR) qualifying assets
Pensions with death benefits (from April 2027)	Pensions (currently exempt — but changing from April 2027)
Gifts made within 7 years of death	Gifts made more than 7 years before death
Trust assets (in some cases)
Share of jointly owned assets

Pensions and IHT — Upcoming Change

Detail	Information
Current rule	Most pension wealth is outside the estate for IHT purposes
From April 2027	Unused pension funds will be included in the estate for IHT
Impact	Estates with large pension pots may now face IHT for the first time
Action	Review estate planning and consider drawing down pension or gifting

This is a significant change — see our inheritance tax planning guide for strategies.

IHT Calculation Example — Single Person

Asset	Value
Home	£350,000
Savings and investments	£100,000
Personal possessions	£25,000
Life insurance (not in trust)	£50,000
Total estate	£525,000
Less nil-rate band	-£325,000
Less RNRB (home to children)	-£175,000
Taxable estate	£25,000
IHT at 40%	£10,000

IHT Calculation Example — Married Couple

Asset	Value
Home (jointly owned)	£600,000
Joint savings and investments	£250,000
Personal possessions	£50,000
Total estate	£900,000

First spouse dies, leaves everything to surviving spouse = no IHT (spouse exemption). Full NRB (£325,000) and RNRB (£175,000) transfer to surviving spouse.

Second spouse dies:

Calculation	Amount
Total estate	£900,000
Own NRB	-£325,000
Transferred NRB	-£325,000
Own RNRB (home to children)	-£175,000
Transferred RNRB	-£175,000
Taxable estate	£0
IHT	£0

The full £1,000,000 combined threshold means no IHT on this £900,000 estate.

Ways to Reduce IHT

Strategy	How it helps
Leave assets to spouse	Spouse exemption — no IHT on transfers between spouses
Leave home to direct descendants	Qualifies for RNRB (£175,000)
Gifts during lifetime	Gifts become exempt after 7 years
Annual gift exemption	£3,000 per year — immediately exempt
Small gifts	£250 per person per year — immediately exempt
Gifts from normal income	Regular gifts from surplus income — immediately exempt
Charitable legacy (10%+)	Reduces IHT rate from 40% to 36%
Life insurance in trust	Payout not included in estate
Business Property Relief	Qualifying business assets — up to 100% relief
Pension planning	Currently exempt (but review for April 2027 changes)
Trust planning	Professional advice recommended

For detailed planning strategies, see our how to avoid inheritance tax legally guide.

IHT Payment

Detail	Information
When due	6 months after the end of the month of death
Who pays	Executors/administrators from the estate
Payment method	Through a direct payment scheme, from the deceased’s bank accounts
Instalments	IHT on property, land, and some shares can be paid in 10 annual instalments
Interest	Charged on late payment and on instalment payments
Probate	Often need to pay IHT before probate is granted — a catch-22 that the direct payment scheme solves