Inheritance Tax Threshold 2026/27: How Much You Can Leave Tax-Free

The inheritance tax threshold — the nil rate band — is £325,000 per person in 2026/27. Anything above that is taxed at 40%, unless it passes to a spouse or civil partner, a charity, or is covered by the extra residence nil rate band of £175,000. Add the two together and a single person leaving their home to children or grandchildren can pass on £500,000 tax-free; a married couple or civil partners can reach £1 million between them.

Key points

• The nil rate band is £325,000 per person, and the inheritance tax rate above it is 40%.
• The residence nil rate band adds up to £175,000 when a home passes to direct descendants, but it tapers away on estates over £2 million.
• Unused bands transfer to a surviving spouse or civil partner, so the second death can have up to £1 million of allowances.
• There is no separate allowance "per child" — the thresholds belong to the person who died, not to each beneficiary.
• From 6 April 2027, most unused pension funds are expected to count as part of the estate for inheritance tax.

The £325,000 nil rate band

Inheritance tax (IHT) is charged on the value of everything you own when you die — property, savings, investments, business interests, cars, jewellery — less any debts and funeral costs. The first £325,000 of that total is taxed at 0%. That slice is the nil rate band, and it is what most people mean when they search for the inheritance tax threshold.

Above £325,000, the rate is a flat 40%. There is no sliding scale of bands the way there is with income tax. Inheritance tax is also a UK-wide tax: unlike income tax, there are no separate Scottish rates or thresholds, so the same £325,000 applies whether the estate is in Glasgow, Cardiff or Canterbury.

Two exemptions matter before you reach for a calculator:

• Spouses and civil partners. Anything you leave to a UK spouse or civil partner is free of inheritance tax, however large. That is why most married couples pay nothing on the first death.
• Charities. Gifts to UK charities are exempt. If you leave at least 10% of your net estate to charity, the rate on the rest drops from 40% to 36%.

The nil rate band has been £325,000 since April 2009 and is frozen for several more years, which is why more estates drift into the net each year as house prices rise.

The residence nil rate band: an extra £175,000

On top of the £325,000, an estate can claim a residence nil rate band (RNRB) of up to £175,000. The conditions are narrower than people expect:

• The estate must include a home — or the proceeds of one you sold or downsized from after 8 July 2015 — that was at some point your residence.
• That home (or its value) must pass to direct descendants: children, stepchildren, adopted or foster children, grandchildren and their spouses. Nephews, nieces, siblings and friends do not qualify.
• The relief is capped at the value of the home. If the property is worth £120,000, you get £120,000 of RNRB, not £175,000.
• It tapers away on large estates. For every £2 the net estate exceeds £2 million, you lose £1 of RNRB — so a single person's RNRB is gone entirely by £2.35 million.

If you sold the family home and moved into something smaller or into care, a "downsizing addition" can preserve the relief you would otherwise have lost, provided assets of at least equivalent value still go to direct descendants.

Married couples: the route to £1 million

Married couples and civil partners get a second bite. Because transfers between them are exempt, the first person to die often uses none of their allowances. Whatever percentage is unused transfers to the survivor, so the survivor's estate can claim:

• £325,000 own nil rate band + £325,000 transferred = £650,000
• £175,000 own residence nil rate band + £175,000 transferred = £350,000
• Total: £1,000,000

Two practical points. First, the transfer is not automatic — the executors have to claim it, using the percentage of the band that was unused on the first death rather than a cash figure. Second, if the first death used part of the band (for example a £100,000 legacy to a sibling), only the remaining percentage carries forward. Our guide on inheritance tax when the second parent dies walks through the paperwork and the percentage calculation in detail.

Unmarried couples get no transfer at all. Two partners who have lived together for 30 years each have their own £325,000 and £175,000, but nothing passes between them tax-free and nothing carries over.

Is there an inheritance tax allowance per child?

No. This is one of the most common misunderstandings. The thresholds belong to the person who died, not to each person inheriting. An estate of £900,000 split between three children does not get three £325,000 bands — it gets one set of allowances, and the tax is paid by the estate before the children receive anything. Dividing an estate more widely reduces each share but does not reduce the tax.

What children do affect is the residence nil rate band, because leaving the home to them (rather than to a sibling, nephew or friend) is what unlocks the extra £175,000.

Gifts and the seven-year rule

Giving assets away during your lifetime can reduce the estate, but only if you survive long enough. Most gifts to individuals are "potentially exempt transfers": if you live seven years after making them, they fall out of the estate entirely. Die within seven years and they are added back in, using up your nil rate band first.

Where a gift on its own exceeds the nil rate band and death occurs between three and seven years later, taper relief reduces the tax due on that gift: by 20% in years 3–4, 40% in years 4–5, 60% in years 5–6 and 80% in years 6–7. Taper relief cuts the tax on the gift, not the value of the gift.

Some gifts are exempt immediately, including the £3,000 annual exemption (carried forward one year if unused), small gifts of up to £250 per person per year, wedding gifts within set limits, and regular gifts genuinely made out of surplus income.

Pensions come into the net from April 2027

Until now, most defined contribution pension pots have sat outside the estate for inheritance tax. From 6 April 2027, the government intends that most unused pension funds and lump sum death benefits will be counted as part of the estate and tested against the same £325,000 and £175,000 bands. Death-in-service benefits from registered schemes are expected to stay outside the charge.

The effect is significant for anyone who has been deliberately spending other savings first and leaving the pension untouched. A £400,000 pot that would previously have passed outside the estate could, from 2027, push an estate well past its allowances — and where the pension holder died after age 75, beneficiaries also pay income tax at their own rate on what they draw out. You can model the before-and-after position with the pension inheritance tax 2027 calculator, and read the detail in our guide to pensions and inheritance tax from April 2027.

Business and farming assets also face tighter rules: from 6 April 2026, 100% Business Property Relief and Agricultural Property Relief are expected to apply only to the first £1 million of qualifying assets, with 50% relief above that.

Worked examples

Example 1 — single person, £600,000 estate

Aisha dies owning a flat worth £380,000 and £220,000 in savings and investments. She leaves everything to her two children.

• Estate value: £600,000
• Nil rate band: £325,000
• Residence nil rate band: £175,000 (home passes to children, and £380,000 exceeds the cap, so the full £175,000 applies)
• Total allowances: £500,000
• Taxable: £600,000 − £500,000 = £100,000
• Inheritance tax: £100,000 × 40% = £40,000

Each child receives £280,000 after tax.

Example 2 — the same estate left to a niece

Change one fact: the flat goes to Aisha's niece instead. A niece is not a direct descendant, so there is no residence nil rate band.

• Allowances: £325,000 only
• Taxable: £600,000 − £325,000 = £275,000
• Inheritance tax: £275,000 × 40% = £110,000

Who inherits the home changes the bill by £70,000 on an identical estate.

Example 3 — married couple, second death at £1.3 million

Tom died in 2019 leaving everything to his wife Carol, using none of his allowances. Carol dies in 2026/27 with an estate of £1.3 million, including a house worth £600,000, all passing to their children.

• Nil rate bands: £325,000 + £325,000 transferred = £650,000
• Residence nil rate bands: £175,000 + £175,000 transferred = £350,000
• Total allowances: £1,000,000
• Taxable: £1,300,000 − £1,000,000 = £300,000
• Inheritance tax: £300,000 × 40% = £120,000

Example 4 — taper on a £2.3 million estate

Raj dies with a net estate of £2.3 million, including a home left to his son. He is a widower but his late wife's estate used her full nil rate band on legacies to her siblings, so nothing transfers.

• Excess over £2 million: £300,000
• RNRB reduction: £300,000 ÷ 2 = £150,000
• RNRB available: £175,000 − £150,000 = £25,000
• Total allowances: £325,000 + £25,000 = £350,000
• Taxable: £2,300,000 − £350,000 = £1,950,000
• Inheritance tax: £1,950,000 × 40% = £780,000

Who reports and pays

The executors or personal representatives value the estate, report it to HMRC and pay any tax due. Inheritance tax is generally payable by the end of the sixth month after the month of death, and interest runs from that point — which is why tax on property is often paid in instalments or funded from the estate's bank accounts before probate completes. Many estates now need no IHT account at all if they fall well within the thresholds and pass to exempt beneficiaries. The official starting point is GOV.UK's inheritance tax pages.

What to do next

Add up property, savings, investments and (looking ahead to 2027) pensions, then compare the total with the allowances your circumstances actually unlock — one nil rate band or two, and whether the home passes to direct descendants. Run the numbers in the inheritance tax calculator to see the liability under today's rules, then use the pension inheritance tax 2027 calculator to see how the April 2027 change affects the same estate. If you are dealing with a second bereavement, start with inheritance tax when the second parent dies, which covers claiming the transferred bands.