The NRB Freeze and IHT UK 2026: £325k Since 2009, How the Freeze Drags More Estates Into IHT, What the RNRB Adds, Record Receipts, and What You Can Do Now
The nil-rate band has been frozen at £325,000 since April 2009 — 17 years of stealth tax. IHT receipts hit £7.5bn in 2024-25 and are forecast to reach £12bn by 2030. DC pensions join the estate from April 2027. The time to act is now.
£325k Frozen Since 2009 — In Real Terms the NRB Should Be ~£520k — The Gap Is the Stealth Tax
A CPI-indexed NRB from 2009 would be approximately £520,000 in 2026 — £195k higher than the frozen £325k. Every year the NRB stays frozen while asset prices rise: more estates cross the threshold. IHT receipts are at record levels and rising. The freeze is extended to 2030. DC pensions join the estate from April 2027. If you have not reviewed your estate recently: your IHT exposure is almost certainly larger than you think.
| Aspect | Detail | Examples / Impact | Planning Action |
|---|---|---|---|
| History of the NRB — from 1986 to the current freeze | INHERITANCE TAX WAS INTRODUCED BY FINANCE ACT 1986: replacing Capital Transfer Tax. The NRB in 1986-87 was £71,000. The NRB was regularly increased by statute: 1987-88: £90k; 1988-89: £110k; 1989-90: £118k; 1990-91: £128k; 1992-93: £150k; 1995-96: £154k; 1996-97: £200k; 1998-99: £223k; 1999-2000: £231k; 2000-01: £234k; 2001-02: £242k; 2002-03: £250k; 2003-04: £255k; 2004-05: £263k; 2006-07: £285k; 2007-08: £300k; 2008-09: £312k; 2009-10: £325k (the last increase). Then the freeze began. In 2024 the NRB remains at £325k. WHAT HAS HAPPENED SINCE 2009: the NRB has been frozen while: (a) UK house prices have risen significantly (Nationwide: +£65k on average UK house price since 2009; London house prices have roughly doubled); (b) equity markets have risen; (c) inflation has eroded the real value of the NRB. The cumulative CPI inflation since 2009 is approximately 60% (RPI: higher). A CPI-indexed NRB would be approximately £520,000 in 2026 — £195k higher than the actual frozen £325k. The gap = £195k 'stealth tax' through the freeze. | REAL TERMS IMPACT — WORKED EXAMPLES: (1) A SINGLE PERSON WITH A LONDON FLAT: in 2009 — flat worth £200k (below NRB); estate £200k; IHT: nil. In 2026 — same flat worth £450k (value doubled); estate £450k; IHT: 40% × (£450k − £325k NRB) = £50k. The flat has not changed; the NRB has not moved; the person now has a £50k IHT liability they did not have in 2009. (2) A MARRIED COUPLE WITH A HOME AND SAVINGS: 2009 — home £250k; savings £200k; total £450k; combined NRB = £650k; IHT: nil. 2026 — home £450k (risen); savings £300k (grown); total £750k; combined NRB + RNRB = £1m (if home passes to children on second death); IHT: nil (still within £1m). BUT: if only the NRB was available (not RNRB — e.g., no children): combined NRB = £650k; IHT = 40% × (£750k − £650k) = £40k. The RNRB is doing critical work — but only where a qualifying home passes to direct descendants. (3) A WIDOW WITH A HOUSE AND PENSION: home £400k; ISA savings £150k; pension £300k (included from April 2027); total £850k; NRB + tNRB = £650k; IHT = 40% × (£850k − £650k) = £80k. The pension inclusion from April 2027 will pull thousands more estates above the threshold. | THE FREEZE IS A STEALTH TAX — AND IT CONTINUES: the Autumn Budget 2024 (October 2024) extended the NRB freeze to April 2030 (from the previous April 2028 extension). The freeze will have lasted 21 years by 2030. Scenario where reform happens: if a new government post-2030 decides to increase the NRB (e.g., to £500k or index it to inflation): estates that had grown above £325k but below the new threshold would no longer be taxable. But that is speculative — the current policy is to continue the freeze to 2030. WHAT YOU CAN DO: (1) Review your estate value NOW — has growth in property/investments taken you above the NRB? If so: the IHT liability is real and growing. (2) Use gifting: annual exemption (£3k/yr); small gifts exemption (£250/person); normal expenditure from income; PETs. Start the 7yr clock immediately. (3) Ensure a will maximises NRB + RNRB: leave the qualifying home to direct descendants (not a spousal life interest only — the RNRB requires the home to pass to direct descendants at some point; an IPDI for the spouse followed by the home passing to children on the spouse's death preserves the RNRB). (4) Consider pension planning (draw down before April 2027 if the pension value is large; or ensure the pension goes to the right beneficiaries). (5) Consider life insurance written into trust to cover the projected IHT liability. |
| The RNRB — how it works and its own freeze | THE RESIDENCE NIL-RATE BAND (RNRB — s8D IHTA 1984): introduced by Finance (No 2) Act 2015; phased in from April 2017. The RNRB is an additional nil-rate band available where: (1) the deceased owned a 'qualifying residential interest' (QRI) — a UK dwelling they lived in at some point; AND (2) the QRI passes to 'direct descendants' (children; grandchildren; stepchildren and their lineal descendants; s8J IHTA definition). RNRB AMOUNTS BY YEAR: 2017-18: £100k; 2018-19: £125k; 2019-20: £150k; 2020-21: £175k (reached its cap); 2021-22 to 2026-27: £175k (frozen). The RNRB was originally planned to be indexed to CPI from 2021-22. Instead: frozen at £175k since 2020. A CPI-indexed RNRB would be approximately £215k in 2026. The gap = £40k 'stealth tax' through the RNRB freeze. THE RNRB TAPER: the RNRB (and tRNRB) is reduced by £1 for every £2 the net estate exceeds £2m (s8E IHTA). Estates above £2m: the RNRB is reduced. Estates above £2.35m (one RNRB + half the taper): no RNRB. Estates above £2.7m (full RNRB + tRNRB + both tapers): no RNRB at all. The £2m taper threshold was also FROZEN in Autumn Budget 2024. As estates grow (property + investment + from April 2027: pensions): more estates will hit the £2m taper. TRANSFERABLE RNRB (tRNRB — s8G IHTA): where the first spouse to die had an unused RNRB (because they did not own a qualifying home, or the home did not pass to direct descendants), the unused RNRB transfers to the surviving spouse's estate. | RNRB INTERACTION WITH ESTATE PLANNING: (1) SPOUSE TRUST FOR THE HOME: if the will puts the home into a DISCRETIONARY trust for the surviving spouse (not an IPDI): the RNRB may be LOST on first death. The RNRB requires the QRI to pass to a direct descendant. A discretionary trust for the spouse does NOT count as passing to a direct descendant. The RNRB is not available on the first death; the tRNRB may transfer (if the RNRB was fully unused). On the second death: the home passes from the discretionary trust to the children — the surviving spouse's own RNRB + tRNRB are available. BUT: if the discretionary trust was a full NRB trust and the home went into it: the second death may not have a home to pass to children (the home passed to the trust on first death; it is a trust asset; it is NOT the surviving spouse's home). Careful will drafting needed to preserve the RNRB. (2) DIRECT GIFT TO CHILDREN: leaving the home directly to children (not into trust) on first death: uses the RNRB of the deceased + the RNRB may be available on the surviving spouse's death if the tRNRB transfers. (3) DOWNSIZING ADDITION (s8FA IHTA): if the deceased sold or gave away a qualifying home after 8 July 2015 and the estate is not otherwise using the full RNRB: a 'downsizing addition' preserves an equivalent RNRB equivalent for the estate. Used by people who sold a large home and downsized (or moved into care); the RNRB is not lost. | RNRB PLANNING IN 2026: (1) ENSURE YOUR WILL PASSES THE HOME TO DIRECT DESCENDANTS: the home (or an IPDI in the home for the surviving spouse, followed by the home to children) should be the route for RNRB availability. A discretionary trust of the home on first death loses the RNRB on that death (unless it is an IPDI — which is treated as the life tenant owning the home for RNRB purposes). (2) IPDI FOR THE SURVIVING SPOUSE + DIRECT TO CHILDREN ON SECOND DEATH: a will trust where the surviving spouse has an IPDI (immediate post-death interest) in the home (s49A IHTA): the RNRB is available on first death (the IPDI life tenant is treated as owning the home; the home then passes to direct descendants on the life tenant's death). (3) CHECK THE TAPER: if the estate is above £2m: calculate whether the RNRB taper applies. Planning to keep the estate below £2m (through gifting and trusts) preserves the full RNRB. (4) SINGLE PEOPLE: a single person cannot use the tRNRB (no deceased spouse to transfer from). The maximum for a single person: £325k NRB + £175k RNRB = £500k. For single people with estates above £500k: the NRB freeze and RNRB freeze are particularly costly. Gifting and life insurance become more important. |
| Record IHT receipts — how many estates now pay IHT | IHT RECEIPTS TREND (HMRC STATISTICS): the IHT receipts data shows a dramatic increase since the NRB freeze: 2009-10 (first year of freeze): approximately £2.4bn; 2014-15: £3.8bn; 2019-20: £4.6bn; 2021-22: £6.1bn; 2022-23: £7.1bn; 2023-24: £7.5bn; 2024-25: approximately £8bn+ (forecast); OBR projection for 2029-30: approximately £12bn. ESTATES PAYING IHT: HMRC publishes data on estates paying IHT with a lag. In 2021-22 (the most recent detailed data): approximately 27,800 estates paid IHT — representing approximately 4.5% of total deaths in England & Wales. By 2024-25 (estimated): approximately 50,000 estates (approximately 7-8% of deaths). The proportion of estates paying IHT is at its highest level since the 1980s. WHY THE NUMBER IS RISING: (1) NRB frozen (£325k since 2009); RNRB frozen (£175k since 2020). (2) House prices in many areas have risen above the NRB. (3) Investment portfolio values have risen. (4) Equity release and other mechanisms to reduce the estate are not universally used. (5) The addition of DC pensions to IHT estates from April 2027 (Finance Act 2024) will add further estates to the taxable pool. | WHO IS BEING CAUGHT BY IHT IN 2026 THAT WASN'T IN 2009: (1) THE LONDON AND SOUTH EAST HOMEOWNER: a person who bought a house in London in 1990 for £120k; it is now worth £600k+. Even with the NRB (£325k) and RNRB (£175k = £500k combined): the house alone breaches the combined threshold for a single person; and on a joint estate there may be savings and other assets on top. (2) THE RETIREE WITH A HOUSE AND A PENSION: before April 2027: a pension of £500k is outside the IHT estate. Post April 2027: a DC pension of £500k is inside the estate. A retiree with: house £350k + ISA savings £100k + DC pension £500k = total estate £950k. Currently (2026): £350k + £100k = £450k in estate (pension excluded). Post April 2027: £950k in estate. With NRB + RNRB = £500k (single person): IHT = 40% × (£950k − £500k) = £180k. This will catch many retired professionals and public sector workers with significant DC/defined contribution pensions. (3) THE COUPLE WHO NEVER REVIEWED THEIR WILLS: a married couple who made wills in 2005 (when the NRB was £275k). Their combined estate is now £800k. The wills leave everything to each other (unlimited spouse exemption — good). On the second death: estate £800k; NRB + tNRB = £650k; IHT = 40% × £150k = £60k. With a RNRB review (they have children; home passes to children on second death): NRB + tNRB + RNRB + tRNRB = £1m: IHT = nil. But: the wills may not be structured correctly to preserve the RNRB. Review needed. | IHT RECEIPT FORECAST — WHAT DOES £12BN BY 2030 MEAN: the OBR's forecast of IHT receipts rising to £12bn by 2029-30 (from £7.5bn today) reflects: (1) continued asset price growth (property; equities) against a frozen NRB and RNRB; (2) the addition of pensions from April 2027; (3) the ageing of the baby boomer generation (more deaths per year with larger estates). POLITICAL PRESSURE FOR REFORM: IHT is widely unpopular — polls consistently show that 60%+ of UK adults consider IHT unfair. The Conservative Party 2024 manifesto pledged to abolish IHT (not implemented as Labour won). Labour's approach: maintaining IHT; extending it to pensions; capping APR and BPR. The Liberal Democrats and Reform UK have also called for IHT reform. The freeze to 2030 suggests IHT will continue to rise in the near term. SCENARIO ANALYSIS — WHAT IF THE NRB IS UNFROZEN IN 2030: (a) If the NRB is CPI-indexed from 2030 (from its 2009 base): it would jump to approximately £520k (the 2009 value indexed 21yr at ~2% CPI). (b) If the NRB is simply updated to, say, £500k: estates between £325k and £500k would escape IHT — saving approximately £70k per person × ~50% married = significant. But: this is entirely speculative. Plan for the current rules; any uplift in the NRB would be a bonus. RECOMMENDATION: act now to reduce your estate under the current frozen rules — every year's delay while asset prices rise = a larger IHT bill growing. |
| 6 strategies to reduce IHT given the NRB freeze | STRATEGY 1 — START GIFTING NOW (the 7yr PET clock): every year the NRB is frozen and your estate grows = a larger IHT bill. The most effective way to reduce the IHT estate: give away assets now and start the 7yr clock (potentially exempt transfer — PET). If you survive 7yr: the gift is fully outside the estate. Taper relief if you die in years 3-7: reduces the charge. The annual exemption (£3k/yr — s19 IHTA) is immediately exempt (no 7yr wait). Small gifts exemption (£250/person) — immediately exempt. Normal expenditure out of income (s21 IHTA) — exempt if conditions met. The sooner gifting starts: the sooner the 7yr clock expires. STRATEGY 2 — MAXIMISE NRB AND RNRB VIA WILL STRUCTURE: ensure the will is structured to maximise the combined NRB + RNRB (up to £1m for a married couple). Specifically: (a) for married couples — ensure the surviving spouse gets an IPDI (or direct gift) of the home so the RNRB is claimed on first death and the tRNRB is transferred to the second death; (b) ensure the will leaves the home to direct descendants (not only to a trust that is not an IPDI); (c) ensure the tNRB claim is made on second death (IHT400 with IHT402). STRATEGY 3 — PENSION PLANNING (BEFORE APRIL 2027): DC pensions are included in IHT estates from 6 April 2027 (Finance Act 2024 Sch 34). A DC pension of £500k in the estate = £200k IHT (at 40% above the NRB). Options before April 2027: (a) draw down the pension and spend it or gift it (PET if given to family; 7yr clock starts); (b) use pension funds to buy an annuity (annuity payments are income; stop on death; nothing in the IHT estate); (c) gift the drawn-down pension funds under the normal expenditure from income exemption if sustainable. | STRATEGY 4 — BUSINESS PROPERTY RELIEF (BPR): assets qualifying for BPR (s105 IHTA) are exempt from IHT (100% BPR on qualifying unquoted business property and AIM shares in trading companies). Replace investment assets in the estate with BPR-qualifying assets. After 2yr holding: 100% exempt from IHT. Note the FA 2026 £1m combined APR+BPR cap (from 6 April 2026): qualifying assets above £1m only attract 50% BPR. For estates where the IHT exposure is above £1m of BPR assets: the post-2026 cap limits the planning. STRATEGY 5 — LIFE INSURANCE WRITTEN INTO TRUST: a life insurance policy (term assurance) written into a discretionary trust: proceeds paid to the trust on death (outside the estate; no IHT). The trust pays the IHT bill from the insurance proceeds — the beneficiaries receive the estate assets without having to sell property to pay IHT. The cost of the insurance (annual premium) is weighed against the projected IHT liability. For a £100k IHT liability: a level term policy with sum assured £100k for 20yr might cost approximately £500-£2,000/yr depending on age and health. STRATEGY 6 — NORMAL EXPENDITURE FROM INCOME (s21 IHTA): gifts from surplus income (income regularly spent on others above the donor's own needs) are immediately exempt from IHT (no 7yr wait; no annual limit). This is an underused exemption. If you earn £60k/yr in pension income and spend £40k/yr: the £20k surplus can be gifted annually and is immediately exempt. Over 10yr: £200k outside the estate with no IHT at all. Keep records (bank statements; details of income and expenditure) to support the exemption claim at death. | ESTATE PLANNING REVIEW — WHAT TO DO IN 2026: (1) CALCULATE YOUR ESTATE VALUE: property (current value); investments and ISAs; savings accounts; life insurance (if not in trust); pension funds (included from April 2027); any share in a business; art, jewellery, and other valuables. Get a rough total. (2) CALCULATE YOUR IHT EXPOSURE: subtract NRB (£325k) + RNRB (£175k if applicable) = (for single person) £500k; (for married couple with home and children) up to £1m. Multiply the excess by 40% = estimated IHT. (3) IF THE LIABILITY IS MATERIAL: consult an IHT specialist (solicitor; accountant; financial adviser) who can model the impact of different strategies. The earlier you start: the more options you have. (4) DRAFT OR UPDATE YOUR WILL: the will is the foundation. Ensuring the will maximises NRB + RNRB (and plans for the tNRB + tRNRB for a surviving spouse) can save hundreds of thousands of pounds with no gifting, no trusts, and no insurance — just good will structuring. (5) DO NOT DELAY: the NRB freeze continues to 2030 (at minimum). Every year that passes = your estate grows (if asset prices continue to rise) while the NRB stays at £325k. The IHT liability is growing in real terms. Act now. |
| The NRB freeze and the pension inclusion — a double impact from April 2027 | FINANCE ACT 2024 — DC PENSIONS IN IHT FROM APRIL 2027: Finance Act 2024 Schedule 34 brings unspent defined contribution (DC) pension funds into the deceased's IHT estate from 6 April 2027 (see /blog/iht-pension-iht-2027-uk for detailed treatment). THE DOUBLE IMPACT: (1) The NRB is frozen at £325k (not increasing). (2) The pensions are added to the estate from April 2027. Combined effect: estates that previously escaped IHT (because the pension was outside the estate) will now be caught — without any increase in the NRB to compensate. HOW MANY ESTATES ARE AFFECTED: HMRC estimates approximately 38,000 additional estates per year will come within IHT because of the pension change (in addition to the estates already paying IHT due to the NRB freeze). A person with: house £350k + savings £100k + DC pension £400k = currently (2026): estate £450k (pension excluded; below £500k single-person threshold if RNRB available = nil IHT). From April 2027: estate £850k (pension included); IHT = 40% × (£850k − £500k) = £140k. The pension change alone adds £140k of IHT where there was none before. THE TRIPLE LOCK PENSION IRONY: the state pension (defined benefit, paid as income) is NOT included in the IHT estate (it is not a transferable asset — it dies with the recipient). Only DC pension funds (self-invested pensions — SIPPs; workplace money purchase schemes; group personal pension; stakeholder pensions) are affected by the April 2027 change. | INTERACTION OF NRB FREEZE AND PENSION INCLUSION FOR A MARRIED COUPLE: EXAMPLE — COUPLE WITH HOUSE, SAVINGS, AND PENSIONS: House £500k; savings £200k; H's DC pension £300k; W's DC pension £200k. Current (April 2026): COMBINED estate on second death: house £500k + savings £200k = £700k. Pensions outside estate. NRB + tNRB + RNRB + tRNRB = £1m. IHT = nil. From April 2027: house £500k + savings £200k + H pension £300k + W pension £200k = TOTAL £1.2m on second death. NRB + tNRB + RNRB + tRNRB = £1m (frozen). IHT = 40% × (£1.2m − £1m) = £80k. The pension inclusion causes £80k of IHT on an estate that would otherwise be IHT-free. PLANNING RESPONSE FOR PENSION INCLUSION: (a) Draw down and spend/gift before April 2027: the drawn-down pension (taxed as income in the year of drawdown) is spent or gifted. If gifted: PET; 7yr clock starts. If spent on lifestyle: reduces pension fund in estate. The income tax on drawdown (20%/40%/45%) is a cost — model whether the income tax now is less than the IHT + income tax at death. (b) Do not draw down and accept the pension will be in the estate: the pension is in the estate; the scheme administrator pays 40% IHT on death (from April 2027); the remainder passes to beneficiaries. The beneficiaries pay income tax on pension withdrawals from the inherited fund. Effective combined rate: IHT 40% + IT 40% on the remainder = up to 64% effective rate on pension assets — worse than any other asset class. (c) Buy an annuity with the pension fund: converts a potentially double-taxed asset (IHT + IT on inherited pension) into guaranteed income (taxable income to the annuitant; nothing left in the estate). | PENSION PLANNING BEFORE APRIL 2027: the window to reduce the IHT impact of DC pensions is closing. Strategies (subject to MPAA and annual allowance rules): (1) INCREASE DRAWDOWN: take more from the pension each year. Pay income tax on the drawdown. Gift the after-tax proceeds to family (PET; 7yr clock). The income tax cost now (at marginal rate) vs the combined IHT+IT cost at death: for a 20% taxpayer who expects their heirs to be 40% taxpayers at death, drawing down now at 20% and gifting (PET) may save IHT at 40% on the remaining pension plus income tax on the inherited pension. (2) USE THE PENSION TAX-FREE LUMP SUM: up to 25% of the pension (subject to the Lump Sum Allowance — £268,275 from April 2024) can be taken as a tax-free cash lump sum. Take the tax-free cash; gift it (PET). This is immediately tax-free cash with no income tax cost; then gifted with a 7yr PET clock. The remaining 75% of the pension is taxable on drawdown. (3) CHARITABLE LEGACY FROM PENSION: if the pension is designated to pass to a charity on death: the pension passes outside the IHT estate (charitable exemption — s23 IHTA) AND the scheme administrator does not pay IHT on the charitable portion. Gifting pension assets to charity on death is a tax-efficient use of pension funds for IHT purposes. SEEK SPECIALIST FINANCIAL ADVICE: pension and IHT planning is complex. An IFA (Independent Financial Adviser) regulated by the FCA specialising in retirement income and estate planning is essential for anyone with significant DC pension funds. |
NRB freeze and IHT UK 2026. s7 IHTA 1984: the nil-rate band — the rate at which IHT is charged above the nil-rate threshold on a transfer on death. The NRB is set by statutory instrument: SI 2008/1932; SI 2009/730; subsequent freeze instruments. Finance Act 2006: planned NRB increases. Budget Red Book 2009 and Finance Act 2009: freeze of NRB at £325k. Finance Act 2010: confirmed freeze. Finance Act 2011: extended freeze to 2014-15. Finance Act 2014: extended to 2017-18. Finance Act 2016: extended to 2020-21. Finance Act 2020: extended to 2025-26 (with RNRB). Autumn Budget 2021: extended to 2026-27. Autumn Budget 2024 (October 2024): extended to 2029-30. As at June 2026: NRB £325k, RNRB £175k, both frozen to April 2030. s8D IHTA 1984: RNRB — inserted by Finance (No 2) Act 2015. Amount: £100k in 2017-18; £125k in 2018-19; £150k in 2019-20; £175k in 2020-21 and all subsequent years to date. s8E IHTA 1984: the RNRB taper — £1 reduction in RNRB for every £2 the estate exceeds £2m. The £2m taper threshold: also frozen. Full RNRB elimination: £2.35m (one RNRB taper); £2.7m (both RNRB + tRNRB). s8FA IHTA 1984: downsizing addition — where the deceased previously owned a qualifying residential interest (QRI) and disposed of it after 8 July 2015, a downsizing addition preserves an equivalent RNRB for the estate (subject to conditions). IHT receipts data: HMRC 'Inheritance Tax Statistics' table T15.3; HMRC 'HMRC Tax and NIC Receipts' monthly bulletin. OBR Economic and Fiscal Outlook (November 2024): IHT forecast table. Estate data: HMRC 'Inheritance Tax Statistics Commentary' tables T5.1, T6.1. s19 IHTA 1984: annual exemption — £3,000 per tax year; unused portion carries forward one year only. s20 IHTA 1984: small gifts exemption — £250 per donee per year; cannot be combined with annual exemption for the same donee. s21 IHTA 1984: normal expenditure out of income — immediately exempt with no limit; conditions: (a) part of donor's normal expenditure; (b) made out of income; (c) donor left sufficient income to maintain their usual standard of living. s22 IHTA 1984: gifts in consideration of marriage or civil partnership — £5,000 from parent; £2,500 from grandparent or remoter ancestor; £2,500 between parties; £1,000 from anyone else. Finance Act 2024 Schedule 34: DC pension funds in IHT estates from 6 April 2027. The scheme administrator (pension provider) is required to pay IHT on any unused DC funds passing on death from 6 April 2027. The pension fund is included in the IHT400 return; IHT is calculated and paid by the scheme administrator before the remainder is transferred to beneficiaries. IHT on pension funds: the scheme administrator's payment of IHT is an administration burden — pension providers have raised concerns about the implementation timeline. HMRC consultation ongoing. Lump Sum Allowance: s637S Finance Act 2004 (as amended from April 2024) — the maximum tax-free lump sum from a pension is £268,275. Amounts above this are taxed as income on the recipient. The LTA (Lifetime Allowance) was abolished from April 2024. Finance Act 2026 (APR/BPR cap): from 6 April 2026, APR and BPR are combined and capped: first £1m of qualifying property = 100% relief; above £1m = 50% relief. This affects estates that previously relied on large BPR or APR claims.
Frequently Asked Questions
Why is the nil-rate band still £325,000 after 17 years?
The nil-rate band (NRB) has been frozen at £325,000 since April 2009 for political and fiscal reasons: successive governments have chosen to use the freeze as a revenue-raising mechanism (a 'stealth tax') rather than increasing the threshold explicitly. The NRB was last increased to £325k in 2009-10; a further planned increase to £350k in 2010-11 was dropped by the Coalition. Since then, every government has extended the freeze — most recently by the Labour Autumn Budget 2024, which froze the NRB until at least April 2030. The practical effect: as property values, investment values, and other asset prices have risen since 2009, more and more estates breach the frozen £325k threshold and pay IHT. IHT receipts have risen from £2.4bn in 2009-10 to £7.5bn+ in 2024-25 — and are forecast to hit £12bn by 2029-30. The freeze will have lasted 21 years by 2030.
What does the nil-rate band freeze mean for my inheritance tax bill?
The freeze means that your IHT liability grows each year — even if you take no action — because your assets (property; investments; savings) are rising in value while the NRB threshold stays at £325k. A house worth £250k in 2009 (below the NRB) may now be worth £400k (above the NRB) — creating an IHT liability that didn't exist before. For a single person: NRB £325k + RNRB £175k (if home passes to children) = £500k threshold. For a couple: up to £1m combined (NRB + tNRB + RNRB + tRNRB) — but this also frozen since 2020. Review your estate value now: if it exceeds the relevant threshold, you have a growing IHT liability. From April 2027: unspent DC pension funds are added to the estate (Finance Act 2024), which will increase the IHT exposure of anyone with significant pension savings.
How much IHT does the UK collect and how many estates pay it?
IHT receipts have risen sharply: approximately £2.4bn in 2009-10 rising to approximately £7.5bn in 2024-25 (a record). The OBR forecasts IHT revenues rising to approximately £12bn per year by 2029-30 under current policy (frozen NRB; pensions in scope from April 2027). The number of estates paying IHT has risen from approximately 25,000 in 2019-20 to approximately 50,000 in 2024-25 — approximately 7-8% of total deaths. The proportion is at its highest level since the 1980s. The freeze, rising asset prices, the forthcoming pension inclusion, and the growing number of deaths in the baby boomer generation all point to continued growth in IHT receipts through the 2020s.
Does the RNRB help mitigate the impact of the NRB freeze?
For married couples with children and a qualifying UK home: yes, significantly. The Residence Nil-Rate Band (RNRB — s8D IHTA 1984) adds up to £175k per person (£350k for a couple using both spouses' RNRBs) where a UK home is left to direct descendants. Combined NRB + RNRB = £500k for a single person; up to £1m for a couple (if both NRBs and both RNRBs are fully used). This £1m combined threshold is frozen since 2020-21 — so it too is being eroded in real terms. The RNRB does NOT help where: there is no qualifying UK home (tenants; people in residential care who have sold their home); the home is not left to direct descendants (e.g., left to a sibling; to a charity; into a discretionary trust that is not an IPDI); the estate is above £2m (the RNRB taper reduces it to nil above £2.35m for one RNRB).
What are the most effective ways to reduce IHT given the frozen nil-rate band?
The most effective strategies in 2026: (1) START GIFTING NOW — PETs start the 7-year clock; annual exemption (£3k/yr) is immediately exempt; normal expenditure from income (s21 IHTA) is immediately exempt with no limit. (2) WILL REVIEW — ensure the will is structured to maximise NRB + RNRB + tNRB + tRNRB for a married couple (up to £1m). Leave the home to direct descendants (or via an IPDI for the surviving spouse). (3) PENSION PLANNING BEFORE APRIL 2027 — DC pensions join the estate from April 2027 (Finance Act 2024). Consider drawing down and gifting before then; or taking the 25% tax-free lump sum and gifting it. (4) BPR QUALIFYING ASSETS — replacing investment assets with AIM shares in qualifying trading companies or shares in qualifying unquoted businesses (100% BPR after 2yr; FA 2026 £1m cap). (5) LIFE INSURANCE IN TRUST — a term policy written into trust; proceeds bypass the estate; cover the projected IHT bill. The sooner you act: the more the 7yr clock works in your favour and the lower the insurance premiums.
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