For 2026 to 2027 the inheritance tax nil rate band is £325,000 and the residence nil rate band is £175,000, so someone leaving their home to children or grandchildren can have a threshold of up to £500,000. Tax is charged at 40% on the value above the threshold, and both bands and the £2 million taper threshold are fixed until 5 April 2031.
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What are the inheritance tax thresholds for 2026 to 2027?
gov.uk lists the nil rate band at £325,000, a figure that has applied since 6 April 2009. The residence nil rate band, which is an extra allowance for a home passed to direct descendants, is £175,000. The table below sets out the main figures that apply to deaths in the 2026 to 2027 tax year.
| Item | 2026 to 2027 position |
|---|---|
| Nil rate band | £325,000 |
| Residence nil rate band | £175,000 |
| Residence nil rate band taper | Reduced by £1 for every £2 of estate value above £2 million |
| Standard rate above the threshold | 40% |
| Reduced rate where 10% or more of the net estate goes to charity | 36% |
| Thresholds fixed until | 5 April 2031 |
| Business and agricultural relief at 100% | First £2.5 million of qualifying property, from 6 April 2026 |
| Unused pension funds and death benefits | Brought into the estate for deaths on or after 6 April 2027 |
Our guide to the inheritance tax nil rate band explains how the band is used up by lifetime gifts, and how inheritance tax is calculated walks through a full estate.
How does the residence nil rate band work, and when is it tapered?
gov.uk says that if you give your home to your children or grandchildren, your threshold can increase to £500,000. That is the £325,000 nil rate band plus the £175,000 residence nil rate band. HMRC’s guidance says the residence nil rate band reduces by £1 for every £2 that the estate is worth above £2 million, so a large estate can lose it entirely.
Any unused residence nil rate band can pass to a surviving spouse or civil partner. HMRC works this out using the percentage of the band that was not used on the first death. Our page on the residence nil rate band covers who counts as a direct descendant and what happens if the home has been sold.
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How long are the thresholds frozen?
At Budget 2025 the government said the nil rate band, the residence nil rate band and the residence nil rate band taper threshold would stay fixed at their current levels for a further year until 5 April 2031. So the £325,000, £175,000 and £2 million figures apply to deaths up to and including the 2030 to 2031 tax year. See our UK tax rates and thresholds for 2026 to 2027 for the other frozen allowances.
What rate of inheritance tax is charged above the threshold?
gov.uk says the standard rate is 40%, charged only on the part of the estate above the threshold. An estate can pay a reduced rate of 36% on some assets if 10% or more of the net value is left to charity in the will. Gifts made in the seven years before death can also be taxed if their total is more than £325,000, and taper relief might mean the tax charged on such a gift is less than 40%, depending on when it was made.
How are pensions brought into inheritance tax from April 2027?
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will count as part of a person’s estate for inheritance tax. Personal representatives will be responsible for reporting and paying any inheritance tax due on them. Death in service benefits from a registered pension scheme are excluded, as are dependants’ scheme pensions from a defined benefit arrangement. The existing exemption for death benefits passing to a surviving spouse or civil partner continues. Our guide to pensions and inheritance tax looks at what this means for people who have been leaving pension savings untouched.
What changed for business and agricultural relief from April 2026?
From 6 April 2026, agricultural property relief and business property relief at 100% apply only to the first £2.5 million of combined qualifying property. The government first proposed £1 million and announced the higher figure on 23 December 2025. Relief at 50% applies to qualifying property above £2.5 million. Any unused allowance can be transferred to a surviving spouse or civil partner, so a couple can pass on up to £5 million of qualifying assets without inheritance tax.
Shares designated as not listed on the markets of recognised stock exchanges now get 50% relief in all circumstances. Inheritance tax on any property that qualifies for these reliefs can be paid in equal annual instalments over 10 years interest free. Read more on inheritance tax business relief.
Can married couples and civil partners combine their thresholds?
Yes. gov.uk says any unused threshold can be added to your spouse or civil partner’s threshold when you die. With both nil rate bands and both residence nil rate bands available, a couple leaving a home to their children can pass on up to £1 million between them before inheritance tax is due, provided the estate is not large enough to be tapered. Our guide to transferring an unused nil rate band explains the claim.
Example. Tom dies in 2026 to 2027 leaving everything to his wife, Ann, so none of his nil rate band or residence nil rate band is used. Ann dies later the same year with an estate that includes the family home, which she leaves to their two daughters. Her personal representatives claim Tom’s unused bands, giving a total threshold of £1 million. If Ann’s estate had been worth £2.1 million, the residence nil rate band available would have been reduced by £50,000 under the taper, because the estate was £100,000 over £2 million.
Frequently asked questions
Has the inheritance tax threshold gone up for 2026 to 2027?
No. The nil rate band is still £325,000 and the residence nil rate band is still £175,000. Both are fixed until 5 April 2031.
Is inheritance tax still 40%?
Yes. The standard rate is 40% on the value above the threshold, or 36% on some assets if at least 10% of the net estate goes to charity.
Do I lose the residence nil rate band if my estate is over £2 million?
You lose part of it. It reduces by £1 for every £2 above £2 million, so a single £175,000 band disappears completely once the estate is £350,000 over that figure.
Will my pension be subject to inheritance tax?
For deaths on or after 6 April 2027, most unused pension funds and death benefits will be included in the estate. Death in service benefits and benefits passing to a spouse or civil partner are treated differently.
Is business relief still 100%?
From 6 April 2026, 100% relief applies to the first £2.5 million of qualifying business and agricultural property, with 50% relief above that.
Sources
- GOV.UK: Inheritance tax thresholds and interest rates
- GOV.UK: Inheritance tax
- GOV.UK: Inheritance tax residence nil rate band
- GOV.UK: Budget 2025 overview of tax legislation and rates ootlar
- GOV.UK: Inheritance tax unused pension funds and death benefits
- GOV.UK: Agricultural property relief and business property relief changes
- GOV.UK: Inheritance tax reliefs threshold to rise to 25m for farmers and businesses
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 6 November 2026. Solar Protect is the trading name of Solar Insurance Services (Medway) Limited, authorised and regulated by the Financial Conduct Authority. This page is general information, not advice on your own circumstances.