Inheritance Tax Allowance UK 2026: How Much Can You Pass On Tax-Free?
Everyone has an IHT allowance of £325,000 (the Nil-Rate Band). If you own your home and leave it to children or grandchildren, the Residence Nil-Rate Band adds £175,000 more — giving £500,000 per person, or up to £1,000,000 for a married couple. Both allowances are frozen until 2030. Everything above the allowance is taxed at 40%.
| Situation | IHT-Free Allowance | Conditions |
|---|---|---|
| Single person, no home / home not to descendants | £325,000 | NRB only (s7 IHTA 1984). No RNRB. |
| Single person, home to children/grandchildren | £500,000 | NRB £325k + RNRB £175k. Home must pass to direct descendants. |
| Married couple, first death to surviving spouse | Up to £1,000,000 on second death | Both NRBs (£650k) + both RNRBs (£350k) transferred to survivor. |
| Married couple, estate above £2m on second death | £650k–£1,000k (tapered) | RNRB tapers at £1 per £2 above £2m. Full NRB still available. |
| Single person, estate above £2,350,000 | £325,000 only (RNRB lost) | RNRB fully tapered. Full NRB still available. |
| Estate with 10%+ charity legacy | NRB + RNRB, 36% rate on remainder | s36 IHTA 1984: 36% rate instead of 40% on taxable estate. |
| Assets with 100% BPR or APR | NRB + RNRB + BPR/APR value | BPR/APR qualifying assets reduce chargeable estate (£1m cap from April 2026). |
2026/27 figures. NRB and RNRB frozen until at least 2030. From April 2026: BPR/APR cap £1m at 100%; 50% on excess.
Inheritance Tax Allowance: Complete Guide
The Nil-Rate Band (NRB) — £325,000 per person, frozen to 2030
The Nil-Rate Band (NRB) is the amount each person can pass on free of IHT on death. It is set at £325,000 per person under s7 IHTA 1984. It has been frozen at £325,000 since 2009 and is set to remain frozen until at least 2030 (confirmed by the Autumn Budget 2024). The NRB applies to everything in the estate — property, savings, investments, personal possessions, business interests (before BPR), and farm assets (before APR). The NRB is used first against any chargeable transfers in the 7 years before death (Chargeable Lifetime Transfers — gifts to trusts). If the estate is below £325,000: no IHT is payable. If the estate is above £325,000: IHT at 40% on the excess (or 36% if 10%+ of the net estate passes to charity). The NRB is NOT reduced by the size of the estate — it is a flat threshold that applies to everyone (unlike the RNRB, which tapers away for large estates).
The Residence Nil-Rate Band (RNRB) — £175,000 for homes passed to children
The Residence Nil-Rate Band (RNRB) is an additional IHT allowance of £175,000 per person, available where: (1) the deceased owned a qualifying residential interest (their main home, or a proportion of it) at the date of death; (2) the home (or a proportion of it) is left to direct descendants — children, grandchildren, stepchildren, adopted children, fostered children, and their descendants (s8J IHTA 1984 — lineal descendants). The RNRB does NOT apply if: the home is left to a discretionary trust (including a standard NRB trust); the home is left to a spouse or civil partner only (though the RNRB is then transferred to the survivor — s8G); the home is left to charities; the home is sold before death (though a downsizing addition may apply — s8FA IHTA 1984, preserving the RNRB where the deceased downsized after 8 July 2015 and left other assets to direct descendants). The RNRB is set at £175,000 per person and frozen to 2030 alongside the NRB.
Combined allowances — up to £1,000,000 for a married couple
For a married couple or civil partnership where both have unused NRBs and RNRBs, the combined IHT allowance on the second death can be up to £1,000,000: NRB: £325,000 + £325,000 (transferred from the first death) = £650,000. RNRB: £175,000 + £175,000 (transferred from the first death) = £350,000. Total: £1,000,000. How the transfer works: on the first death, any unused proportion of the NRB and RNRB is transferred to the surviving spouse (s8A IHTA 1984 for NRB; s8G for RNRB). The transfer is of proportion, not value — if the first to die used none of their NRB (estate passed entirely to the surviving spouse, exempt under s18), 100% of the NRB is transferred. The transferred NRB is applied at the rate in force at the time of the second death. Since the NRB is frozen, a couple who were married for 20 years still transfer 100% of £325,000 (not a higher amount from any prior NRB). Requirements: the parties must have been married or in a civil partnership; the transfer must be claimed by the executor of the survivor's estate on form IHT402.
RNRB taper — allowance is lost for estates above £2 million
The RNRB is tapered away for large estates: for every £2 by which the net estate exceeds £2,000,000 (the taper threshold), the RNRB is reduced by £1. The taper applies to the RNRB only — the standard NRB (£325,000) is not tapered. Illustrative taper: estate £2,100,000 = RNRB £125,000 (reduced by £50,000); estate £2,350,000 = RNRB £0 (fully tapered for a single person); estate £2,700,000 = combined RNRB £0 for a couple (fully tapered on the second death). Estate composition for the taper: the £2m threshold applies to the gross estate value (before deductions for liabilities and reliefs, but after the spousal exemption and charity exemption). This is the 'transfer of value' approach: a husband who leaves everything to his wife — the wife's estate includes both portions. If the combined estate exceeds £2m, the RNRB on the second death is tapered. Planning: estate equalisation between spouses; AIM BPR investments to reduce the chargeable estate; charitable legacies.
How the IHT allowance is used in practice — calculation
The IHT calculation on death: (1) Calculate the gross estate (everything owned at market value); (2) Deduct liabilities (mortgages, debts, funeral costs — s172 IHTA); (3) Deduct spousal and charitable exemptions; (4) Reduce by the value of available BPR and APR reliefs; (5) Apply the NRB (£325,000 — the basic threshold); (6) Apply the RNRB if the home passes to direct descendants (up to £175,000); (7) Apply transferred NRB and RNRB from a deceased spouse if applicable; (8) IHT at 40% on the remaining taxable estate (or 36% if 10%+ goes to charity). Example: sole person, estate £600,000, home £400,000 (left to children), savings £200,000. IHT: estate £600,000 − NRB £325,000 − RNRB £175,000 = taxable estate £100,000. IHT: £100,000 × 40% = £40,000. If the home were left to a sibling instead of children: no RNRB — taxable estate £275,000, IHT £110,000. The difference: £70,000 — purely from how the will is drafted.
Gifts and the allowance — using the NRB during lifetime
The NRB is used sequentially: Chargeable Lifetime Transfers (CLTs — gifts to trusts in the 7 years before death) are set against the NRB first. If the NRB is exhausted by CLTs, the estate pays IHT at 40% from the first pound. PETs (gifts to individuals — s3A IHTA 1984) made in the 7 years before death are added back to the estate and set against any remaining NRB (after CLTs). The NRB 'available' at death may therefore be significantly reduced if substantial gifts to trusts were made within 7 years. The RNRB is not affected by CLTs or PETs — it is applied to the home passing to direct descendants regardless of prior gifting. The cumulation period for NRB purposes is 7 years — CLTs made more than 7 years before death do not use up the NRB at death, and the full NRB is available at death against the estate. Annual exemption (£3,000/yr) and small gifts (£250/recipient/yr) are entirely outside the cumulation calculation — they are deducted from the value of gifts before the CLT/PET status is determined.
Frequently Asked Questions
What is the inheritance tax allowance in the UK for 2026?
The inheritance tax allowance for 2026/27 is: NRB (Nil-Rate Band): £325,000 per person — applies to the full estate. RNRB (Residence Nil-Rate Band): £175,000 per person — applies where the main home passes to direct descendants. Combined: £500,000 per person (£325,000 + £175,000). For a married couple, both allowances are transferred on the first death: combined allowance on the second death is up to £1,000,000. Both allowances are frozen until at least 2030.
Can I pass on £1 million without inheritance tax?
Yes — for a married couple or civil partnership, it is possible to pass on up to £1,000,000 without IHT if: (1) Both spouses use their NRB (£325,000 each = £650,000) and both use their RNRB (£175,000 each = £350,000); (2) The RNRB requires the main home to be left to children or grandchildren; (3) Both NRBs and RNRBs must be transferred from the first death — claim them using form IHT402 in the second estate. For a single person with a home: the maximum IHT-free threshold is £500,000 (NRB + RNRB). Without a home or without direct descendants: the threshold is £325,000 (NRB only).
What happens to my IHT allowance if I don't use it?
For a married couple or civil partnership: the unused proportion of both the NRB and the RNRB is transferred to the surviving spouse on death (s8A IHTA for NRB; s8G for RNRB). If the first to die leaves everything to the surviving spouse (fully exempt under s18 IHTA), 100% of both allowances transfers to the survivor. For a single person: any unused NRB or RNRB cannot be carried forward to a future death — it is simply not used.
Does the inheritance tax allowance increase with inflation?
No — both the NRB (£325,000) and the RNRB (£175,000) are frozen until at least 2030 (confirmed by the Autumn Budget 2024). In real terms, the IHT threshold has been falling every year since 2009 as property values and inflation have risen. The NRB has been £325,000 since April 2009 — it would need to be approximately £550,000–600,000 to match inflation over that period. This fiscal drag is pulling more and more estates into IHT.
How does the RNRB taper affect my inheritance tax allowance?
The RNRB (£175,000 per person) tapers away for large estates: it reduces by £1 for every £2 by which the net estate exceeds £2,000,000. A single person with an estate of £2,350,000 loses the entire RNRB (£175,000 × 2 = £350,000 excess over £2m). A couple where the combined estate on the second death exceeds £2.7m also loses the full combined RNRB (£350,000). The standard NRB is NOT tapered — only the RNRB is subject to the £2m taper threshold. Solutions: estate equalisation between spouses; AIM BPR investments; equity release.
Claim Your Full £500,000 Allowance — Start With Your Will
The RNRB (up to £175,000 additional allowance) is only available where the will directs the home to children or grandchildren. A will that leaves the home to the wrong person or to a discretionary trust loses the RNRB entirely. WillSafe will kits for England and Wales are structured to claim the full £500,000 allowance.
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