Inheritance Tax Nil Rate Band UK: What It Is, How It Works, and Transferred NRB (2026)
The Nil Rate Band (NRB) is £325,000 per person in 2026/27 — frozen since 2009 and set to stay frozen until 2030. A married couple can combine up to £650,000 (NRBs) or £1,000,000 (NRBs + RNRBs) through the transferred NRB (form IHT402) and transferred RNRB (IHT436). Here is how it works and how to make the most of it.
| Situation | NRB | RNRB | Total Threshold | IHT | Notes |
|---|---|---|---|---|---|
| Single person, estate £400,000, home to children | £325,000 | £175,000 | £500,000 | £0 | Estate below NRB + RNRB; no IHT; RNRB needs home passing to direct descendants |
| Single person, estate £600,000, no home (RNRB not available) | £325,000 | £0 | £325,000 | £110,000 | RNRB requires qualifying residential interest passing to direct descendants; without it, threshold = NRB only |
| Single person, estate £600,000, home worth £200k passes to children | £325,000 | £175,000 (full — home value > RNRB) | £500,000 | £40,000 | RNRB: min(£175k, £200k value of home) = £175k; combined threshold = £500k |
| Married couple, survivor's estate £900,000, tNRBs + tRNRBs | £650,000 (£325k own + £325k transferred) | £350,000 (own + transferred RNRB) | £1,000,000 | £0 | Couple can combine up to £1m threshold; estate below £1m = zero IHT; transferred NRB claim IHT402; transferred RNRB claim IHT436 |
| Married couple, survivor's estate £1,200,000, tNRBs + tRNRBs | £650,000 | £350,000 | £1,000,000 | £80,000 | £1.2m estate with full couple's threshold = £200k taxable; IHT = £80k |
| First spouse used 50% of NRB (gifts to children before death) | £325k own + 50% × £325k transferred = £487,500 | £350,000 (if tRNRB also transferable) | £837,500 | Varies | Transferred NRB % = 1 - (NRB used at first death / NRB at first death); here 50% unused = 50% transfer; applied at current NRB rate (£325k × 50% = £162.5k transferred) |
| CLT of £100,000 in year 3 before death (trust); death with estate £500,000 | £325,000 − £100,000 CLT = £225,000 remaining at death | £175,000 (if home to descendants) | £225,000 + £175,000 = £400,000 | £40,000 (+ any IHT on CLT — credit for IHT already paid) | CLT in 7yr before death uses up NRB at death; CLTs recorded on IHT400 boxes 4 and 5; earliest CLTs first |
NRB: £325,000 (frozen to 2030 — s8C IHTA 1984). RNRB: £175,000 per person (s8D IHTA 1984; frozen to 2030; requires qualifying residential interest passing to direct descendants — s8K IHTA; taper s8E — £1 per £2 above £2m adjusted net estate; single fully tapered at £2,350,000). Transferred NRB: s8A IHTA 1984 — unused % of first spouse/CP's NRB; applies to current NRB rate at second death; max 100%; claim form IHT402; NOT automatic. Transferred RNRB: s8G IHTA 1984; claim form IHT436. IHT rate: 40% (s7 IHTA 1984); 36% if ≥10% of baseline to charity (s36 IHTA). CLTs: gifts to discretionary trusts — chargeable in lifetime at 20% if above available NRB; use up NRB at death in 7yr rolling window (s7(1) IHTA). PETs: s3A IHTA — chargeable only if donor dies within 7yr. Spousal exemption: s18 IHTA — unlimited transfers to UK-domiciled spouse; limited to NRB (£325k) to non-UK domiciled spouse (unless non-dom elects UK domicile under s267 IHTA). Charitable exemption: s23 IHTA — unlimited. BPR: s103-114 IHTA — up to 100%/50%; £1m combined BPR/APR cap April 2026.
Nil Rate Band: Complete Guide
What is the Nil Rate Band and how long has it been frozen?
The Nil Rate Band (NRB) is the threshold below which no IHT is charged on a person's estate at death. In 2026/27 it is £325,000 — the same as it has been since 6 April 2009 (when it was raised from £312,000). The NRB has been frozen at £325,000 for 17 consecutive years. Under s8C IHTA 1984 (as amended), the NRB is currently set to remain at £325,000 until at least April 2030. In real terms, the frozen NRB has roughly halved in value: £325,000 in 2009 is equivalent to approximately £500,000-£550,000 in 2026 prices (based on CPI inflation). This means that houses and estates that would have been below the IHT threshold in 2009 have now grown above it. The original intention when IHT was introduced in 1986 was that only the wealthiest estates would pay it; the combination of property price rises and a frozen NRB now catches many middle-class estates. The NRB applies per person: each individual has a £325,000 NRB at death. Married couples and civil partners can combine NRBs through the transferred NRB mechanism (s8A IHTA 1984 — see below). The NRB is also the threshold for chargeable lifetime transfers (CLTs — e.g., gifts to discretionary trusts): CLTs above the NRB face IHT at 20% in lifetime (or 40% if the donor dies within 7yr). The RNRB (s8D IHTA) adds up to £175,000 additional threshold (also frozen to 2030) specifically for estates passing the family home to direct descendants.
How the NRB works in practice — the IHT calculation
The IHT calculation at death: (1) Calculate the estate: total value of all assets at death (property at open market value; savings; investments; business interests before any BPR; pension from April 2027; etc.) minus liabilities (outstanding mortgage; debts; funeral costs). (2) Apply exemptions: spousal exemption (s18 IHTA — anything passing to surviving spouse is fully exempt); charitable exemption (s23 IHTA — anything to registered UK charity); business property relief (s103-114 IHTA); agricultural property relief (s115-124 IHTA). (3) Apply the NRB: £325,000 (or higher if transferred NRB available). (4) Apply the RNRB: up to £175,000 if qualifying residential interest passes to direct descendants (s8D IHTA); subject to the £2m taper (s8E IHTA). (5) Calculate taxable estate: estate minus all exemptions minus NRB minus RNRB. (6) IHT = 40% × taxable estate (s7 IHTA 1984). The order matters: the NRB is set against the chargeable estate after all other exemptions have been applied. If the chargeable estate is below the NRB + RNRB, IHT = £0. If CLTs were made in the 7 years before death, they use up the NRB in chronological order (earliest first — s7(1) IHTA), reducing the NRB available at death.
The transferred Nil Rate Band — how couples get up to £650,000
Section 8A IHTA 1984 (introduced by Finance Act 2008) allows the unused NRB of a predeceased spouse or civil partner to be transferred to the surviving spouse. The rules: (1) the first spouse must have died on or after 9 October 2007 (retrospective for deaths from the original IHT introduction in 1974 — earlier legislation); (2) the amount transferred = the percentage of the NRB that was unused at the first death; (3) this percentage is applied to the NRB rate at the TIME OF THE SECOND DEATH (not the rate at the first death); (4) the maximum transfer is 100% of one NRB — so the maximum combined NRB for the survivor is 200% of the current NRB = £650,000 (2026/27). Example: husband dies in 2020; leaves everything to his wife under the spousal exemption; 100% of his NRB was unused; wife dies in 2026; her NRB = £325,000 (own) + 100% × £325,000 (transferred) = £650,000. If the husband had left £100,000 to children in his will (using 31% of his NRB), the transferred percentage = 69%; transferred NRB on wife's death = 69% × £325,000 = £224,250; wife's total NRB = £325,000 + £224,250 = £549,250. The transferred NRB is NOT automatic: the executors of the second estate must claim it on form IHT402, accompanied by evidence of the first spouse's death and their IHT position (if they had an estate requiring IHT400, a certified copy; if no IHT400 was filed, a statutory declaration may be needed). There is no time limit on claiming the transferred NRB — it can be claimed many years later.
Chargeable lifetime transfers and how they use the NRB
The NRB is not purely for use at death — it is also the relevant threshold for chargeable lifetime transfers (CLTs). A CLT is a transfer made in lifetime that is immediately chargeable: the main example is a gift to a discretionary trust. The CLT is taxed at 20% IHT in lifetime (half the death rate) if it exceeds the available NRB. On death, CLTs made within 7 years are brought back into the NRB calculation (the 7-year cumulative rule under s7(1) IHTA 1984). How this reduces the NRB at death: suppose a person makes a CLT of £100,000 into a discretionary trust in Year 3 before death. On death in Year 3: the £100,000 CLT is within the 7yr window; the NRB at death is reduced by the £100,000 CLT = £225,000 NRB remaining; the estate is then taxed above £225,000 (or £400,000 with RNRB). The 7-year cumulative rule: ONLY CLTs and chargeable transfers made in the 7 years before death are included. PETs (outright gifts to individuals) only become chargeable if the donor dies within 7 years — and they use up the NRB in the order they were made (earliest CLTs/PETs first, then later ones). Key planning point: CLTs to discretionary trusts (e.g., regular trust contributions) can be very effective IF they are below the NRB in any 7-year rolling window — no IHT in lifetime, no IHT on death (if the 7-year window has cleared). But CLTs above the NRB in the 7yr rolling window trigger 20% IHT in lifetime (or 40% on death less a credit for the 20% paid).
Planning to make the most of the NRB — key strategies
Despite its frozen value, the NRB is the foundation of all IHT planning. Key strategies: (1) Use the full NRB: ensure that the NRB is not wasted on assets passing to the spouse under the spousal exemption if the combined estate means the survivor will exceed the combined thresholds. In a couple where both have large estates, leaving some assets directly to children (up to the NRB on first death) rather than everything to the spouse can use the first NRB without any IHT; however, for most couples the transferred NRB achieves this without the complication of splitting assets on first death. (2) Annual exemption (s19 IHTA): £3,000/yr removes assets from the estate — every year below the NRB, progressive NRB maintenance. (3) PETs: outright gifts to individuals; if survived 7 years, reduces the estate without using the NRB at death. (4) Normal expenditure from income (s21 IHTA): uncapped, immediate — reduces the estate from income surplus without the 7-year clock or the NRB. (5) Business Property Relief (BPR): assets qualifying for 100% BPR (AIM shares, qualifying businesses) are exempt without using the NRB. (6) Charitable giving: assets to charity are s23 exempt AND the 36% rate (s36 IHTA) reduces IHT on the whole estate. The NRB interacts with all of these — understanding it precisely ensures no relief is wasted or duplicated.
Frequently Asked Questions
What is the inheritance tax nil rate band for 2026/27?
The nil rate band (NRB) for inheritance tax in 2026/27 is £325,000 per person. This is the threshold below which no IHT is charged. It has been frozen at £325,000 since April 2009 and is currently set to remain at this level until at least April 2030 (s8C IHTA 1984). The RNRB (Residence Nil Rate Band) adds a further £175,000 per person (also frozen to 2030) specifically when the family home passes to direct descendants, giving a combined threshold of £500,000 per person. A married couple or civil partnership can combine both thresholds through the transferred NRB (s8A IHTA) and transferred RNRB (s8G IHTA), potentially giving a combined threshold of up to £1,000,000.
Can a married couple share the nil rate band?
Yes — through the transferred NRB mechanism (s8A IHTA 1984). When one spouse dies, any unused percentage of their NRB transfers to the surviving spouse. If the first spouse leaves everything to the survivor under the spousal exemption (s18 IHTA), 100% of the NRB is unused and therefore 100% transfers. On the survivor's death, their threshold = their own NRB (£325,000) + the transferred NRB (up to £325,000) = up to £650,000. With the transferred RNRB (s8G IHTA — claim form IHT436) the combined threshold can reach £1,000,000. The transferred NRB is NOT automatic — executors of the surviving spouse's estate must claim it on form IHT402. There is no time limit to make the claim.
How does the nil rate band interact with lifetime gifts?
The NRB is shared across death and the 7 years before death. Chargeable lifetime transfers (CLTs — gifts to discretionary trusts) made in the 7 years before death use up the NRB at death. Potentially exempt transfers (PETs — outright gifts to individuals) become chargeable if the donor dies within 7 years and then also use up the NRB (in chronological order, earliest first). Example: person makes a CLT of £100,000 in year 3 before death; at death, NRB remaining = £325,000 − £100,000 = £225,000; the estate is then only protected up to £225,000 (or £400,000 with RNRB). PETs that are survived for 7 years are free of IHT and do NOT reduce the NRB at death — they are simply ignored.
What happens to the nil rate band if I don't use it all?
If a person dies and their chargeable estate is below the NRB (or the NRB is not used in full because most assets pass to the surviving spouse under the spousal exemption), the unused percentage of the NRB transfers to the surviving spouse/civil partner under s8A IHTA 1984. The percentage is calculated as: (NRB minus amount used at first death) / NRB × 100. On the survivor's death, the transferred NRB percentage is applied to the current NRB rate (£325,000 in 2026/27). The maximum transferable is 100% (one full NRB). Claim on form IHT402; include evidence of the first spouse's death and their estate/IHT position (IHT400 or statutory declaration). The executors of the SECOND estate make the claim — it cannot be claimed during the first estate's administration.
Why has the nil rate band not increased with inflation?
The NRB was last increased in April 2009 (from £312,000 to £325,000). Since then it has been frozen by successive governments, most recently extended to April 2030. Over the same period, UK house prices have risen significantly (average UK house price increased from approximately £160,000 in 2009 to over £280,000 in 2026). The frozen NRB means that many estates which would have been below the IHT threshold in 2009 now exceed it — pulling more middle-class families into the IHT net. The RNRB (introduced from April 2017 to give an additional £175,000 per person for estates passing the family home to children) partly addresses this for family homes, but only for qualifying estates. The NRB itself has, in real terms, roughly halved in purchasing power since 2009 — a deliberate fiscal decision that raises significant IHT revenue for the government.
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