IHT Nil Rate Band Frozen: The £325,000 Freeze and What It Means for Your Estate
The Inheritance Tax nil rate band has been stuck at £325,000 since April 2009 — now frozen until at least April 2030. In real terms the threshold has lost around 35–40% of its purchasing power. HMRC IHT receipts have tripled in that period, pulling many middle-income families into a tax that was once seen as a levy on the very wealthy.
NRB Freeze Timeline
| Tax year / date | NRB level | Notes |
|---|---|---|
| 2009/10 | £325,000 | Frozen from this point. Was rising annually before 2009. |
| 2010–2017 | £325,000 | Freeze maintained through coalition and Conservative governments. |
| 2017/18 | £325,000 | RNRB introduced: £100,000 extra for qualifying residential property. |
| 2020/21 | £325,000 | RNRB reached maximum £175,000. Combined NRB + RNRB = £500,000 (individual). |
| March 2021 | £325,000 | Freeze extended to April 2026 in Spring Budget. |
| October 2024 | £325,000 | Freeze further extended to April 2030 in Autumn Budget. |
| 2026/27 | £325,000 | Current position. RNRB also frozen at £175,000 until April 2030. |
Fiscal Drag: How the Freeze Captures More Estates
‘Fiscal drag’ occurs when tax thresholds are frozen while the values being taxed rise. For IHT, the key driver is house price inflation. In April 2009, the average UK house price was approximately £163,000 — comfortably below the £325,000 NRB. A couple in a typical property with modest savings had an estate well below the threshold.
By 2026, the average UK house price exceeds £290,000 — and in London and the South East, properties that cost £200,000–£300,000 in 2009 are now worth £500,000–£800,000. An estate containing such a property, plus savings, pensions, and other assets, can easily exceed the £325,000 NRB by a multiple.
The RNRB (up to £175,000 per person for estates passing a home to direct descendants) provides some protection — but only for qualifying families. Single people, childless couples, and those passing assets to anyone other than direct descendants do not benefit.
The freeze to April 2030 will extend the effect further. A £325,000 threshold in April 2009 had the real purchasing power of approximately £530,000 in 2026 — and will be worth approximately £580,000–£600,000 in real 2030 terms if inflation continues at current rates. Without indexation, the IHT system will continue to drag more and more middle-income families into IHT purely through asset price inflation, with no change in their relative wealth.
Frequently Asked Questions
Why has the IHT nil rate band been frozen at £325,000 since 2009?
The nil rate band (NRB) was last increased on 6 April 2009, when it reached £325,000 following a series of annual increases. From 2009 onwards, successive governments chose to freeze it rather than allow it to rise with inflation or earnings. The stated reason has varied: fiscal consolidation post-2008 financial crisis, then fiscal policy choices by subsequent Chancellors. The freeze is a form of 'fiscal drag' — the threshold stays the same in nominal terms while asset values (especially property) rise, so a growing proportion of estates exceed the threshold over time. In the March 2021 Budget, the freeze was extended to April 2026. In the October 2024 Autumn Budget (Chancellor Rachel Reeves), the freeze was extended further to April 2030. The NRB will therefore have been frozen for at least 21 consecutive years by April 2030 — an unusually long period of tax-band inertia.
In real terms, how much has the IHT threshold fallen since 2009?
The UK Consumer Price Index (CPI) has risen by approximately 60–65% between April 2009 and April 2026. Applying that inflation rate: a £325,000 threshold in April 2009 had the purchasing power of roughly £520,000–£530,000 by 2026. Because the threshold has stayed at £325,000, it is now worth only about 60–63% of its 2009 real value — a fall of around 37–40% in real terms. For house-price inflation, the divergence is even more stark: the average UK house price in 2009 was approximately £163,000; by 2026 it is over £290,000 — an 80% increase. In London and the South East, average prices roughly doubled or more. An estate containing a typical London property has been pushed well above the £325,000 NRB through house price inflation alone, with no increase in the threshold to compensate.
How much has IHT revenue grown as a result of the frozen threshold?
HMRC IHT receipts have grown significantly as the frozen threshold captures more estates: in 2009/10 receipts were approximately £2.4 billion; by 2023/24 receipts exceeded £7.5 billion — a rise of over 200% in nominal terms. The Office for Budget Responsibility projected that receipts would continue to rise toward £10 billion per year by the late 2020s as the April 2026 BPR/APR cap and the April 2027 pension inclusion both take effect. The number of estates paying IHT has also grown: around 4% of all UK deaths generated an IHT charge in 2022/23 (up from around 3% in 2010). While 4% may sound small, it translates to approximately 27,000 estates per year — a significant and growing number, disproportionately concentrated in regions with high property values.
What is the Residence Nil Rate Band and does it compensate for the frozen NRB?
The Residence Nil Rate Band (RNRB) was introduced from April 2017 to provide an additional allowance where a main residence is passed to direct descendants (children, grandchildren, stepchildren). The RNRB is currently £175,000 per person (frozen until April 2030). For a married couple or civil partners, the combined available allowances are: NRB (£325,000) + RNRB (£175,000) per person = £1,000,000 total (where neither allowance was used on the first death and the estate includes a qualifying residence). The RNRB does partially compensate for the frozen NRB — a couple can now pass up to £1 million free of IHT where property passes to children. However, the RNRB has significant limitations: (1) It only applies where a qualifying residence passes to direct descendants — not to siblings, friends, charities, or nieces/nephews. (2) The RNRB tapers away where the estate exceeds £2 million (£1 for every £2 above £2m). (3) It does not help estates without a qualifying residential property (cash-only estates, rented accommodation). (4) It is also frozen until 2030, so it too suffers real-terms erosion.
What can I do to protect my estate given the frozen nil rate band?
The main planning strategies to mitigate the impact of the frozen NRB are: (1) MAKE A WILL — the most basic step. A will that maximises use of both spouses' NRBs and RNRBs can protect up to £1 million. An outdated will may waste the NRB entirely. (2) USE BOTH SPOUSES' ALLOWANCES — with transferable NRB and RNRB, a couple with appropriate wills and a qualifying home can shelter £1 million from IHT. Equalise assets between spouses to ensure neither estate is disproportionately large. (3) GIFTS — potentially exempt transfers (PETs) made more than 7 years before death are outside the estate completely. Annual gifting (£3,000/year per person, plus £250 small gift exemption, plus wedding/civil partnership gifts) reduces the estate over time. (4) TRUSTS — nil-rate band discretionary trusts on first death capture the NRB in a trust and keep the assets outside the surviving spouse's estate while providing access if needed. (5) LIFE INSURANCE IN TRUST — a whole-of-life policy written in trust provides a lump sum outside the estate to fund the IHT bill. (6) BPR/APR INVESTMENTS — qualifying business property and agricultural land attract 100% BPR/APR relief (up to £2.5m from April 2026). (7) REVIEW REGULARLY — as asset values rise, the planning needs to be updated to reflect the current position.
Will the IHT nil rate band ever be unfrozen?
As of mid-2026, the NRB is frozen until at least April 2030 under the October 2024 Autumn Budget commitments. Whether it will rise after 2030 is a matter of political choice — no government has committed to indexing the NRB to inflation. Arguments for unfreezing: the real-terms erosion is significant, and many middle-income families who are asset-rich but cash-poor (especially those with property in London and the South East) are caught by a threshold that was never intended to capture them. Arguments against: IHT receipts are growing and the government relies on this revenue, particularly after extending the freeze to fund other commitments. Index-linked increases would reduce receipts materially. The most likely scenario is a further freeze extension or a modest nominal increase in 2030, rather than full inflation indexation. Estates should plan on the basis that the NRB will remain at or near £325,000 for the foreseeable future.
Review Your Estate Plan
With the NRB frozen until 2030 and house prices continuing to rise, an estate plan that was adequate a few years ago may no longer protect your family from IHT. A well-drafted will is the foundation of any IHT planning strategy.
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