⚡ Inheritance Tax 2026 — Updated April 2026
Rate: 40% | Nil-rate band: £325,000 | Residence nil-rate band: £175,000 | Combined (married couple): up to £1 million | Thresholds frozen until 2030 |
Inheritance Tax (IHT) is charged at 40% on estates above the nil-rate band. With thresholds frozen until 2030 while house prices rise, more families are being caught each year. UK Inheritance Tax Thresholds 2026| Allowance | Amount | Who Gets It |
|---|
| Nil-rate band (NRB) | £325,000 | Every individual | | Residence nil-rate band (RNRB) | £175,000 | When main home left to direct descendants | | Combined NRB + RNRB | £500,000 | Single person leaving home to children/grandchildren | | Married couple/civil partners | Up to £1,000,000 | Both NRBs and RNRBs can transfer to surviving spouse | | RNRB taper | Reduced above £2m | Estates above £2m lose RNRB proportionally |
| ⚠️ IHT thresholds are frozen until April 2030. As house prices rise, more estates will exceed these thresholds. Now is the time to review your estate planning. |
IHT Calculation Examples UK 2026| Estate Value | Available Allowances | Taxable Amount | IHT Due (40%) |
|---|
| £400,000 | £325,000 NRB | £75,000 | £30,000 | | £600,000 | £500,000 (NRB + RNRB, home to children) | £100,000 | £40,000 | | £800,000 | £500,000 | £300,000 | £120,000 | | £1,500,000 (couple) | £1,000,000 | £500,000 | £200,000 |
Key IHT Exemptions and Reliefs 2026| Exemption | Amount | Notes |
|---|
| Spouse/civil partner | Unlimited | Assets to spouse fully exempt | | Annual gifting | £3,000/year | Carry forward one year — max £6,000 | | Small gifts | £250/person | Unlimited recipients | | Regular gifts from income | Unlimited | Must be from surplus income, regular pattern | | 7-year rule (PETs) | Tapers year 3–7 | Gifts exempt if donor survives 7 years | | Business Property Relief | 50–100% | Qualifying business assets — changed April 2026 | | Charity donations | Unlimited | Reduces IHT rate to 36% |
| ⚠️ From April 2027, unused pension pots will be included in estates for IHT. This is a major change — review pension nominations and estate plans before April 2027. |
How to Reduce Your IHT Bill Legally- Use annual gift exemption — Give £3,000/year free of IHT. Over 10 years, that shelters £30,000.
- Regular gifts from income — If you have surplus income, regular gifts are exempt immediately.
- Spend pension funds last — Currently outside the estate (changing April 2027).
- Leave assets to spouse first — Transfers between spouses are IHT-free. Unused thresholds transfer on death.
- Life insurance in trust — Pays outside your estate, covering IHT without adding to it.
- Charitable giving — Leaving 10%+ to charity reduces IHT rate to 36%.
What is the inheritance tax threshold in the UK for 2026?The nil-rate band is £325,000. With the residence nil-rate band of £175,000 for homes left to direct descendants, a single person can pass up to £500,000 tax-free. Married couples can combine allowances — potentially up to £1,000,000. How much inheritance tax do you pay in the UK?IHT is charged at 40% above the available nil-rate bands. A reduced rate of 36% applies if 10% or more of the estate is donated to charity. Can I give money away to avoid inheritance tax?Yes, within HMRC rules. The annual gifting exemption allows £3,000/year immediately. Larger gifts become exempt if the donor survives 7 years (Potentially Exempt Transfers). Regular gifts from surplus income are also immediately exempt. Do pensions count as part of my estate for IHT?Currently, pension pots are outside your estate for IHT. From April 2027, the government plans to bring unused pensions within the estate. Review your estate plan before this change takes effect. Sources: HMRC Inheritance Tax — GOV.UK · HMRC IHT thresholds and rates · October 2024 Budget — Agricultural Property Relief changes |
