Inheritance Tax Reliefs UK 2026: Every Exemption Explained
Updated 15 May 2026 · 9 min read · England & Wales
Inheritance tax (IHT) in England and Wales is charged at 40% on the estate value above the nil-rate band — but the UK tax code contains a wide range of reliefs and exemptions that can dramatically reduce, and sometimes eliminate, the IHT bill. This guide covers every relief available in 2026, with the thresholds, conditions, and limits that apply.
2026 threshold freeze: The nil-rate band (£325,000) and residence nil-rate band (£175,000) are frozen until April 2030. As estates grow with inflation, more will cross these thresholds — making active use of reliefs increasingly important.
1. Nil-Rate Band (NRB)
The nil-rate band is the core IHT threshold — the amount of any estate charged at 0% before the 40% rate applies.
- Amount: £325,000 per person
- Frozen until: April 2030
- Applies to: All assets in the estate (after specific reliefs)
- Transferable: Yes — unused NRB transfers to a surviving spouse or civil partner (see below)
Any gifts made in the seven years before death that used the NRB reduce the amount available at death. See our guide to the nil-rate band.
2. Residence Nil-Rate Band (RNRB)
An additional nil-rate band available when a qualifying residence is inherited by direct descendants.
- Amount: £175,000 per person (2026/27)
- Condition: The estate must include a qualifying residential property that passes to a direct descendant (children, grandchildren, step-children, adopted children)
- Taper: The RNRB is reduced by £1 for every £2 of estate value above £2 million gross. Eliminated entirely at £2.35 million
- Transferable: Yes — unused RNRB transfers to surviving spouse or civil partner
- Downsizing: Available even if the property was sold before death, provided the deceased downsized from a more valuable property after July 2015
See our full guide to the residence nil-rate band.
3. Transferable Nil-Rate Band (TNRB)
Where a spouse or civil partner dies without using all of their NRB or RNRB, the unused percentage transfers to the survivor's estate. This doubles the effective threshold for most married couples.
- Unused NRB: up to 100% of £325,000 = extra £325,000 on second death
- Unused RNRB: up to 100% of £175,000 = extra £175,000 on second death
- Maximum combined allowance for married couple: £1,000,000
- Claim: executor makes the claim on form IHT402 as part of the second death estate
See our guide to the transferable nil-rate band.
4. Spouse and Civil Partner Exemption
Gifts between spouses and civil partners are entirely exempt from IHT — both during lifetime and on death — under s.18 IHTA 1984. There is no upper limit provided both parties are UK domiciled. If the recipient is non-UK domiciled, the exempt amount is capped at £325,000 (beyond which the donor's NRB applies).
This exemption does not apply to cohabiting partners, regardless of the length of the relationship.
5. Charitable Giving Exemption
Gifts to qualifying charities are entirely exempt from IHT under s.23 IHTA 1984. Additionally:
- If you leave at least 10% of your net estate to charity, the IHT rate on the rest of the estate is reduced from 40% to 36%
- This applies to gifts in your will or outright charitable gifts within seven years of death
- The charity must be registered in the UK or meet the HMRC definition of a qualifying charity
6. Business Property Relief (BPR)
BPR reduces the taxable value of qualifying business assets by either 50% or 100%.
| Asset type | BPR rate |
|---|---|
| A business or interest in a business (sole trader, partnership share) | 100% |
| Unquoted shares (including AIM) in a qualifying trading company | 100% |
| Quoted shares giving control of a qualifying company (more than 50%) | 50% |
| Land/buildings/machinery used by a qualifying partnership or company | 50% |
Conditions: two-year minimum ownership before death; the business must be a trading business (not an investment vehicle); BPR cannot apply to “excepted assets” not used for the business. From April 2026, BPR and APR combined are capped at 100% for the first £1 million — amounts above this attract an effective 20% IHT rate.
7. Agricultural Property Relief (APR)
APR works similarly to BPR for agricultural land and property in the UK, Channel Islands, or Isle of Man.
- 100% relief: agricultural property occupied by the owner for farming purposes for two years, or let for seven years
- 50% relief: some tenanted agricultural property where occupation conditions are not met
- Applies to farmland, farm buildings, farmhouses (if of a character appropriate to the land)
- From April 2026: combined BPR + APR capped at £1 million at 100% — same rule as BPR
8. Taper Relief
Taper relief reduces the IHT payable on potentially exempt transfers (PETs) — gifts to individuals — that become chargeable because the donor dies within seven years. Taper relief reduces the IHT on the gift (not the value of the gift), and only applies if the gift exceeds the available nil-rate band.
| Years between gift and death | IHT rate on gift |
|---|---|
| 0–3 years | 40% |
| 3–4 years | 32% |
| 4–5 years | 24% |
| 5–6 years | 16% |
| 6–7 years | 8% |
| 7+ years | 0% (exempt) |
9. Annual Gift Exemption
Each person can give away up to £3,000 per tax year free of IHT. The annual exemption can be carried forward one year only, giving a maximum of £6,000 if the previous year was unused (own year's allowance must be used first).
10. Small Gifts Exemption
Up to £250 per recipient per tax year can be given to any number of people without IHT consequences — provided the small gifts exemption is the only exemption used for that recipient in that year (it cannot top up the annual exemption to a single recipient).
11. Wedding / Civil Partnership Gifts
Gifts on the occasion of a marriage or civil partnership are exempt up to:
- £5,000 from a parent of the couple
- £2,500 from a grandparent or great-grandparent
- £2,500 from the couple to each other
- £1,000 from any other person
The gift must be made before the ceremony to qualify.
12. Normal Expenditure Out of Income
Regular gifts made from surplus income — not from capital — are exempt from IHT with no annual limit, under s.21 IHTA 1984. Three conditions must all be met:
- The gifts must be made as part of the donor's normal expenditure
- They must be made out of income (not capital)
- After making the gifts, the donor must be left with sufficient income to maintain their usual standard of living
This exemption is powerful for high-income individuals making regular gifts to children or grandchildren. See our normal expenditure out of income guide.
13. Potentially Exempt Transfers (PETs)
Any outright gift to an individual (not into a trust) is a potentially exempt transfer. It becomes fully exempt if the donor survives seven years after the gift. There is no upper limit on PETs. If death occurs within seven years, the gift is included in the estate and taper relief may apply (see above).
Quick-Reference Summary
| Relief / Exemption | Amount / Rate | Key condition |
|---|---|---|
| Nil-rate band | £325,000 | Per person; frozen to 2030 |
| Residence nil-rate band | £175,000 | Qualifying property to direct descendants; estate < £2m |
| Transferable NRB/RNRB | Up to £1m combined | Spouse / civil partner only |
| Spouse exemption | Unlimited (UK domicile) | Legally married / civil partnership only |
| Charitable giving | Unlimited (+ 36% rate) | Registered UK charity |
| BPR | 100% / 50% | Trading business; 2-year ownership; £1m cap from Apr 2026 |
| APR | 100% / 50% | Agricultural land; 2- or 7-year occupation; £1m cap from Apr 2026 |
| Taper relief | 8%–40% | PETs only; applies 3–7 years post-gift |
| Annual gift exemption | £3,000 p.a. | 1-year carry-forward only |
| Small gifts | £250 per recipient | Not combined with annual exemption to same person |
| Wedding gifts | £1,000–£5,000 | Before ceremony; relationship-dependent |
| Normal expenditure | Unlimited | Regular gifts; from income surplus; lifestyle maintained |
| PETs | Unlimited | Fully exempt if donor survives 7 years |
Frequently Asked Questions
What is the total IHT-free allowance for a married couple in 2026?
A married couple or civil partnership can combine up to £1 million of IHT-free allowances: £325,000 nil-rate band each (£650,000 combined) plus £175,000 residence nil-rate band each (£350,000 combined), assuming both allowances are unused on the first death, the estate includes a qualifying residence passing to direct descendants, and the estate value is below the RNRB taper threshold (£2 million).
Does the spouse exemption apply to unmarried partners?
No. The spousal/civil partner exemption under s.18 IHTA 1984 applies only to legally married spouses and civil partners. Cohabiting partners — however long-standing — receive no equivalent exemption. Gifts between cohabitees are subject to normal IHT rules and the seven-year rule.
What is the difference between an IHT exemption and a relief?
An exemption removes an asset entirely from the charge to IHT (e.g. gifts to a spouse are simply exempt). A relief reduces the taxable value (e.g. Business Property Relief at 100% makes the asset worth nil for IHT, but the asset is still assessed — it just attracts zero tax). In practice the difference matters mainly for calculating whether IHT is due and for filling in the IHT400.
Can you use multiple reliefs on the same asset?
Reliefs generally apply to different types of assets and cannot double-count. However, the nil-rate band can be applied against any asset after specific reliefs (like BPR or APR) have been deducted. It is common to apply BPR to qualifying business assets first, then apply the NRB to any remaining taxable estate.
Is the annual gift exemption used up if you don't use it?
The £3,000 annual exemption can be carried forward one year only. If unused in 2025/26, the full £6,000 is available in 2026/27, but only if the 2026/27 allowance is used first. Unused amounts do not accumulate beyond one carry-forward year.
What changed with IHT reliefs in the October 2024 Budget?
The most significant change was capping the combined Business Property Relief (BPR) and Agricultural Property Relief (APR) at 100% for the first £1 million, with excess qualifying assets taxed at an effective 20% rate (50% of the 40% IHT rate), effective April 2026. Pension funds were also brought into the IHT estate from April 2027. The nil-rate band, residence nil-rate band, and spousal exemption remain unchanged.
Start with a Will That Uses These Reliefs
Reliefs like the RNRB and transferable NRB only work if your will is structured correctly. Our DIY will kit guides you through writing a will that uses the available allowances — and flags when you need specialist advice for larger estates.
Get the WillSafe Kit →Related Articles
- IHT thresholds 2026
- Nil-rate band explained
- Residence nil-rate band
- Business Property Relief
- Seven-year rule and taper relief
- IHT gift exemptions
- Normal expenditure out of income
- How to reduce your IHT bill
This article is for general information only and does not constitute tax or legal advice. IHT reliefs are complex and conditions change — always consult a qualified tax adviser for estate planning specific to your circumstances.