IHT Nil Rate Band Freeze UK: Why More Estates Are Paying Inheritance Tax in 2026

Updated 31 May 2026 · 9 min read · Inheritance Tax & Planning

The inheritance tax nil rate band — the amount you can leave free of IHT — has been frozen at £325,000 since 2009. With house prices roughly doubling over that period, more families than ever are being pulled into the IHT net by a threshold that has not risen for more than 16 years. Understanding how the freeze works, what combined thresholds are available, and what planning still reduces IHT is essential for anyone with property.

The Freeze in Numbers

Nil rate band (NRB)£325,000 — frozen since 6 April 2009; frozen until at least 5 April 2030
Residence NRB (RNRB)£175,000 — available for homes left to direct descendants; also frozen until 2030
Single person maximum£500,000 (NRB + RNRB) — only where qualifying home left to children/grandchildren
Married couple maximum£1,000,000 (transferable NRB + RNRB for both spouses) — with full RNRB qualification
IHT rate on excess40% (or 36% if 10%+ of estate given to charity)
RNRB taperReduces by £1 for every £2 above £2m net estate — fully tapered at £2.35m

Why the Freeze Matters: Fiscal Drag

Fiscal drag is what happens when tax thresholds remain static while the values they tax rise. With a frozen NRB:

A homeowner who bought in the early 2000s for £150,000 and whose property is now worth £450,000 has an estate that exceeds the NRB — purely because of house price appreciation, not additional wealth creation.
The RNRB is only available if the home goes to direct descendants — single people, those without children, and those leaving their estate to partners or charities cannot access it.
HMRC inheritance tax receipts reached record levels in 2024-25 — estimated at over £8 billion — and are forecast to continue rising through the freeze period to 2030.

In real terms (adjusted for general price inflation), the £325,000 NRB in 2026 is worth significantly less than it was in 2009. If the NRB had been uprated with CPI inflation since 2009, it would be approximately £450,000–£460,000 by 2026.

The Residence Nil Rate Band: Conditions and Pitfalls

The RNRB supplements the NRB but comes with conditions that many families fail to meet:

Must be left to direct descendants — children, grandchildren, great-grandchildren, and their spouses/civil partners. Siblings, parents, friends, and charities do not qualify.
The property must be residential — investment properties that were never the deceased’s home do not qualify; buy-to-lets count only if the deceased ever lived there as their main residence.
Downsizing provisions — if the deceased sold a home and downsized after 8 July 2015, the “downsizing addition” may preserve some or all of the RNRB that would otherwise be lost.
£2 million taper — the RNRB tapers away for estates above £2 million, making it unavailable for larger estates.

A single person without children who dies owning a £450,000 house faces IHT at 40% on £125,000 (£450,000 − £325,000) — a £50,000 IHT bill — because the RNRB is unavailable. The same person, if married and having left the house to children, would have no IHT to pay at all.

Transferable NRB and RNRB: The Married Couple Advantage

Married couples and civil partners have a significant advantage: the unused NRB and RNRB from the first death transfer to the survivor. Where the first spouse leaves everything to the survivor (using the spouse exemption — no IHT on inter-spouse transfers), 100% of the NRB and 100% of the RNRB are potentially transferable. On the survivor’s death, combined with their own bands: NRB £650,000 (2 × £325,000) plus RNRB £350,000 (2 × £175,000) = £1,000,000 combined threshold. This is why “up to £1 million inheritance tax free” is often cited for married couples — but only if the full RNRB qualification conditions are met at the second death.

What Planning Still Works

Despite the freeze, several strategies continue to reduce or eliminate IHT:

Make a will that uses both NRBs efficiently. Many couples waste part of the first NRB by leaving everything to each other. A well-drafted will with a nil-rate band discretionary trust or careful share of residue provision can shelter more.
Lifetime gifting. Gifts to individuals that survive the 7-year period are fully exempt. The annual exemption (£3,000/year) and normal expenditure out of income exemption are immediately effective.
Charitable legacy. Leaving 10% or more of the net estate to charity reduces the IHT rate from 40% to 36% — a meaningful saving on larger estates.
Life insurance in trust. A whole-of-life policy written in trust pays directly to beneficiaries without entering the estate — providing funds to pay the IHT bill without eroding the estate for beneficiaries.
Pension review. Seek specialist advice on pension death benefits following the October 2024 Budget changes (pensions may be subject to IHT from April 2027).

FAQs

What is the nil rate band and when was it last increased?

The nil rate band (NRB) is the threshold below which an estate pays no inheritance tax — the amount a person can leave on death free of IHT. It is currently £325,000 and has been frozen at this level since 6 April 2009, when it was raised from £312,000. Prior to the freeze, the NRB increased annually — it rose from £285,000 in 2006-07 to £300,000 in 2007-08, £312,000 in 2008-09, and then £325,000 in 2009-10. It has not changed since. The Autumn Budget 2024 extended the freeze until at least 5 April 2030 — meaning the NRB will have been frozen for over 21 years by the time the freeze is scheduled to end. Over that period, average UK house prices have more than doubled, meaning a threshold that once sheltered most family homes now fails to do so in many parts of the country.

What is the residence nil rate band and how does it combine with the standard NRB?

The residence nil rate band (RNRB) is an additional IHT threshold introduced in April 2017, available where a person leaves a qualifying residential property (typically the family home) to a direct descendant (children, grandchildren, and their spouses). The RNRB is currently £175,000 per person (also frozen until 2030). Combined with the standard NRB, a single person can potentially leave up to £500,000 free of IHT (£325,000 NRB + £175,000 RNRB). For a married couple or civil partners, where unused NRB and RNRB are transferable to the survivor, the combined threshold is up to £1,000,000 (2 × £500,000). Critical limitations of the RNRB: (1) it only applies to property left to direct descendants; (2) it tapers away by £1 for every £2 of net estate above £2 million — estates over £2.35 million receive no RNRB; (3) it requires the deceased to have owned a qualifying residential property at death or at some point and downsized; (4) it does not apply where the home is left to siblings, friends, or charities.

Why has the nil rate band freeze increased the number of estates paying IHT?

The IHT nil rate band freeze is an example of 'fiscal drag' — rising asset values (especially property) push more estates above a static threshold. The Office for Budget Responsibility (OBR) estimated that the extended freeze to 2030 will bring an additional 200,000 estates into the IHT net compared with indexation. Key drivers: (1) House prices — the UK average house price has risen from approximately £170,000 in 2009 to around £285,000-£300,000 in 2025-26 (national average, but much higher in London and the South East). A property alone in London or the Home Counties frequently exceeds the £325,000 NRB. (2) Pension and investment wealth — rising stock markets and pension values over two bull market cycles have increased wealth held in investment portfolios. (3) Inflation — general price inflation has increased the nominal value of all assets. (4) Life expectancy — people dying later accumulate more assets; the freeze catches them. HMRC IHT receipts rose to record levels in 2024-25, and are forecast to continue rising through the freeze period.

Can the nil rate band be transferred between spouses?

Yes. The transferable nil rate band (TNRB) allows any unused NRB from the estate of the first spouse or civil partner to die to be transferred to the surviving spouse's estate and added to their own NRB at death. For example: if the first spouse died leaving everything to the survivor (using the spouse exemption, so no NRB was used against the first death), 100% of the first NRB — £325,000 — is available to transfer to the survivor. Added to the survivor's own NRB (£325,000), the combined NRB is £650,000. The same applies to the RNRB — unused RNRB from the first death transfers to the survivor. The transferable NRB percentage (not the absolute amount) transfers — so if the NRB increases before the second death, the survivor benefits from the higher value. A key planning point: the transfer must be claimed on the IHT400 following the second death; it is not automatic. The personal representative must have sufficient records of the first death to support the claim.

What planning steps can reduce or eliminate IHT in 2026?

With the NRB frozen and property values high, IHT planning has never been more important. The main available strategies are: (1) Make a will — a will that uses both spouses' NRBs and RNRBs efficiently (leaving assets to children, not just to each other in ways that waste the RNRB) can shelter up to £1 million. (2) Lifetime gifting — PETs fall out of the estate after 7 years; annual exemptions, small gifts, and normal-expenditure-out-of-income can reduce the estate without a 7-year wait. (3) Pension planning — pensions were (until the October 2024 Budget reforms) outside the IHT estate; from April 2027, inherited pension pots may be subject to IHT (consult a financial adviser for the latest position). (4) Life insurance in trust — a whole-of-life policy written in trust pays out to the beneficiaries free of IHT and can fund the IHT bill directly. (5) Charitable legacies — leaving 10% or more of the net estate to charity reduces the IHT rate from 40% to 36% (Finance Act 2012 s.209). (6) Business and agricultural property relief — qualifying business and agricultural assets attract 100% relief (now capped at £1 million from April 2026 for most assets). Note: the Autumn Budget 2024 announced changes to agricultural property relief and business property relief from April 2026 — verify the current position with a specialist before relying on these reliefs.

Does the IHT freeze affect everyone in the UK equally?

No — the geographic impact is highly unequal. In London and the South East, average house prices routinely exceed £500,000–£700,000 or more, meaning a single property alone can consume the entire £500,000 NRB + RNRB threshold for a single person. Estate agents in outer London frequently market homes at £600,000–£900,000. A homeowner in those areas who dies single (no transferable NRB available) faces IHT on the value above £500,000, even after the RNRB. In contrast, a homeowner in the North of England or Wales where average house prices are £180,000–£250,000 is much less likely to breach the NRB. Regional house price divergence has made IHT increasingly a London and South East issue — though rising prices elsewhere are slowly changing this. The freeze exacerbates this inequality because it reduces the NRB in real terms for all regions equally, while nominal property values rise faster in high-value areas.

A Will Is the Foundation of IHT Planning

With the nil rate band frozen until 2030, a will that uses both spouses’ bands efficiently and makes clear provision for children is the first and most important step in reducing your estate’s IHT exposure. WillSafe’s DIY will kit for England and Wales helps you put a valid will in place today.

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