The standard Inheritance Tax threshold in the UK is £325,000 per person. This is legally known as the Nil-Rate Band (NRB). Any part of an estate that exceeds available thresholds is generally taxed at a flat rate of 40%.
That is the short answer.
The longer answer is where things get interesting. Because the amount of inheritance tax payable depends on the value of the estate, who inherits it, whether a home qualifies for the Residence Nil Rate Band, and what planning was carried out before death.
This guide explains everything about the current inheritance tax threshold.
You’ll get to know:
- What is the current inheritance tax threshold
- Inheritance tax threshold for married couples
- Inheritance tax when second parent dies, and
- Much more…
Let’s get into it!
What Is Inheritance Tax?
Despite its name, the UK’s Inheritance Tax actually behaves like an estate tax. It is a specific type of tax imposed on the estate of a deceased person before it is transferred to their beneficiaries. Know that “estate” is just a legal term for everything you own.
It includes your house, your savings accounts, your investments, and your car. It even includes your personal assets like jewellery or art.
When you die, HMRC assesses the value of the deceased’s estate. Then they deduct any outstanding liabilities you may have left behind. These liabilities can include a mortgage, credit card debts, or funeral costs. After that, whatever value is left over is what gets assessed for tax.
The estate is only subject to Inheritance Tax if its value exceeds the available tax-free thresholds. Your total estate value needs to cross a specific inheritance tax threshold before the estate may become liable to Inheritance Tax. So only the wealth that is above that tax-free allowance faces a bill.
What Is The Inheritance Tax Threshold?
The standard Inheritance Tax threshold in the UK is £325,000. This baseline is legally known as the “Nil-Rate Band.” If the total net value of your estate is under this amount, your beneficiaries won’t owe a single penny to HMRC. But anything over this £325,000 mark is generally taxed at a flat rate of 40%.
However, remember that the “true” threshold is not the same for everyone. Depending on your marital status and who you leave your assets to, your personal inheritance tax threshold can easily double or even triple.
For 2026/27, here’s what the inheritance tax threshold UK looks like:
| Allowance | Amount 2026/27 |
| Standard nil rate band | £325,000 |
| Residence nil rate band | £175,000 |
| Combined threshold (with home to descendants) | £500,000 |
| Married couple combined threshold | Up to £1,000,000 |
| Taper threshold (estates over this lose RNRB) | £2,000,000 |
That £325,000 figure has been sitting there since April 2009 and there is not even a single penny of increase in over 16 years. And it’s not moving any time soon either. The Autumn Budget confirmed the freeze will now run until April 2031. So if you were hoping the standard inheritance tax threshold might creep up with inflation, that’s not happening for a while yet.
What Is the Residence Nil Rate Band?
The Residence Nil Rate Band (RNRB) was introduced to help families pass on their homes. It is worth £175,000. It is actually an extra £175,000 tax-free threshold given by the government. This means when you add this £175,000 home allowance to your standard £325,000 allowance, your personal inheritance tax threshold jumps to £500,000.
But it comes with a few strict conditions.
Yes, you only get this boost to your inheritance tax threshold if:
- You own a home (or did at some point and downsized)
- That home passes to direct descendants, meaning children, grandchildren, step-children or adopted children
Note: Nieces, nephews, siblings, friends, and charities do not count for this particular allowance.
What Is Inheritance Tax Threshold For Married Couples?
For married couples in the UK, the combined Inheritance Tax threshold can be as high as £1 million tax-free. However, the exact amount depends entirely on how your estate is distributed. It also depends on who inherits your assets.
When one spouse or civil partner dies, anything left to the surviving partner is completely exempt from inheritance tax. Yes. It does not matter how much it’s worth. There’s just no threshold on that transfer at all.
Then, when the second partner dies, any unused portion of the first partner’s nil rate band and residence nil rate band can be transferred across. So if the first spouse used none of their allowance (because everything went to the surviving spouse), the survivor’s estate can claim both.
That means:
-
- £325,000 x 2 = £650,000 standard nil rate band
- £175,000 x 2 = £350,000 residence nil rate band
- Total inheritance tax threshold for married couples: up to £1,000,000
It is worth remembering that this transfer is not at all automatic. The executors must actively claim it following the death of the second partner. They can do it by using the correct HMRC forms. If you miss this step, it can lead to losing out on hundreds of thousands of pounds of allowance that was rightfully yours.
However, it is entirely avoidable with the right guidance.
What Is The Inheritance Tax When A Second Parent Dies?
As we just discussed, when the first parent dies and leaves everything to the surviving spouse, there’s usually no IHT to pay at that point. This means anything that is left to the surviving partner is completely exempt from inheritance tax. Inheritance Tax is assessed when the second parent dies. This is because that is when the estate actually passes down to the children.
At that stage, HMRC looks at the combined nil rate bands and also at the residence nil rate bands of both parents. This is in order to determine the final inheritance tax threshold. If the family home is being left to children, and both allowances transfer properly, a couple can shelter up to £1 million before tax kicks in. And above that, it’s 40% on the excess.
If you are an adult child dealing with the estate of your second parent, this is the exact moment the Inheritance Tax bill is calculated. Your final liability depends entirely on maximising that inheritance tax threshold.
As the executor or beneficiary, your main job right now is to make sure that you gather the paperwork from your first parent’s passing. You must use those records in order to claim their unused allowance. This way you can shield up to £1 million of your second parent’s estate from a 40% tax bill.
Tip: You generally have a strict time limit of 24 months from the end of the month in which your second parent died to file the HMRC forms and claim this transferred allowance.
What Percentage Is Inheritance Tax?
The standard UK Inheritance Tax (IHT) rate is 40%. It is only charged on the portion of your estate that exceeds your tax-free allowance. For example, if your individual inheritance tax threshold is £325,000 and your estate is worth £400,000, you don’t pay tax on the whole lot. You only pay 40% on the extra £75,000. This will result in a tax bill of £30,000.
The 36% Charity Discount
If you choose to leave a portion of your estate to a good cause, HMRC offers a special discount on the tax rate.
- The Rule: If you leave at least 10% of your net estate to a registered UK charity in your will, your overall Inheritance Tax rate drops from 40% to 36%.
- The Bonus: Any money you leave directly to the charity is also 100% tax-free.
For larger estates, utilisation of this 10% can be a massive win-win. This way you can pass a substantial sum of money to a cause you genuinely care about. Simultaneously, it reduces the tax percentage your family has to pay on everything else that sits above your inheritance tax threshold.
The Residence Nil Rate Band Taper: The £2 Million Trap
The government draws a strict line for wealthy estates. If the total value of your estate is too high, HMRC will slowly take that extra £175,000 allowance back.
This process is known as tapering. It will reduce your ultimate inheritance tax threshold benefits.
The rule is that: for every £2 your estate goes over £2 million, you permanently lose £1 of your Residence Nil Rate Band.
It means for an individual, the £175,000 property allowance vanishes entirely once the estate hits £2,350,000. And for a married couple passing on combined allowances, the property bonus disappears completely if the estate reaches £2,700,000.
How Much Before Inheritance Tax Is Due? An Example
Numbers make this easier to picture, so here’s a simple one. Imagine someone dies and leaves an estate that is worth £500,000. This includes their home, which goes to their two children.
- Nil rate band: £325,000
- Residence nil rate band: £175,000
- Total inheritance tax threshold: £500,000
- Taxable amount: £0
- IHT due: £0
Now let’s bump that estate up to £600,000 with the same circumstances.
- Inheritance tax threshold available: £500,000
- Taxable amount: £100,000
- IHT at 40%: £40,000
You can see how quickly the bill climbs once you’re over the line. This is exactly why so many families are falling into the tax trap lately. House prices have risen sharply since 2009. But the inheritance tax threshold hasn’t moved an inch.
What’s Changing For 2026/27 And Beyond
A couple of genuinely important changes are worth knowing about:
Agricultural and Business Property Relief. From 6 April 2026, the rules around APR and BPR have been tightened. Previously, qualifying agricultural and business assets could often get 100% relief with no upper limit. Now there’s a combined £2.5 million allowance for 100% relief. Above that figure, relief drops to 50%. Yes, it is subject to legislation in force for the relevant tax year. It basically means an effective 20% tax rate on the excess. In case you run a family business or own farmland, this is a big shift for you to know.
Pensions joining the estate. From 6 April 2027, the government intends unused pension funds and certain death benefits to become part of an individual’s estate for Inheritance Tax purposes, subject to the legislation in force. Up until now, pensions have sat outside the estate. Hence, they were one of the most tax-efficient things to pass down. But that’s about to change now. Anyone who’s been quietly using their pension as an inheritance planning tool should get this reviewed sooner rather than later.
Quick Summary: Inheritance Tax Threshold
- The inheritance tax threshold for 2026/27 is £325,000.
- An additional £175,000 residence nil-rate band may be available.
- An individual can potentially pass on £500,000 tax-free.
- Married couples and civil partners may be able to pass on up to £1 million.
- The standard inheritance tax rate is 40%.
- The residence allowance starts tapering once an estate exceeds £2 million.
The Bottom Line
The standard inheritance tax threshold for 2026/27 is £325,000.
But it isn’t that simple. Missing just one detail among the standard nil rate band, the residence nil rate band, the taper, and the married couples’ rules can cost you thousands. This is because there are so many moving parts.
However, careful estate planning today could save your family a substantial amount of tax tomorrow.
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How CruseBurke Can Help
At CruseBurke, we help individuals, families, landlords, business owners and retirees understand the current inheritance tax threshold UK rules and identify available allowances, exemptions and reliefs.
If you want to protect your estate, explore gifting strategies, or understand how thresholds apply to your situation, reach out to us today!
Disclaimer: The information about the inheritance tax threshold provided in this blog includes text and graphics of a general nature. It does not intend to disregard any of the professional advice.
