For the 2026/27 tax year, inheritance tax in the UK is charged at 40% on the part of an estate above the tax-free thresholds. The nil-rate band stays frozen at £325,000, and the residence nil-rate band at £175,000 where a home passes to direct descendants. A married couple or civil partners can combine their allowances to pass on up to £1 million tax free. This guide sets out the thresholds, rates, exemptions and reliefs that apply in 2026/27.
| Allowance or rate | 2026/27 |
|---|---|
| Nil-rate band | £325,000 (frozen to April 2030) |
| Residence nil-rate band | £175,000 (frozen to April 2030) |
| Combined for a couple | Up to £1,000,000 |
| Standard rate above the threshold | 40% |
| Reduced charity rate | 36% (if 10%+ of the net estate goes to charity) |
| Taper threshold for the residence band | £2,000,000 |
Plain-English guide written by Simon Jenkins — covering every stage of the probate process.
The nil-rate band and residence nil-rate band
Every estate has a nil-rate band of £325,000, the amount that can pass free of inheritance tax. On top of that, the residence nil-rate band of £175,000 is available when a main home, or a share of it, passes to children, grandchildren or other direct descendants. Both bands are frozen until April 2030, which means that as house prices and asset values rise, more estates are drawn into inheritance tax each year.
Because unused allowances transfer between spouses and civil partners, a surviving partner’s estate can carry both their own and their late partner’s bands. Two full nil-rate bands plus two residence nil-rate bands add up to the widely quoted £1 million a couple can leave to their children tax free.
The rate: 40%, or 36% for charitable estates
Inheritance tax is charged at 40% on the value of the estate above the available threshold. There is an incentive to give to charity: if you leave at least 10% of the net estate to charity, the rate on the rest falls to 36%. Everything left to a spouse, civil partner or qualifying charity is exempt in full.
The £2 million taper
The residence nil-rate band is not available to everyone. For larger estates it is tapered away by £1 for every £2 by which the estate exceeds £2 million. An estate worth well over £2 million can therefore lose the residence band altogether, which is one reason planning matters most for higher-value estates.
Speak to Simon Jenkins — Free, No Obligation
Call us today for an honest assessment of the estate. No jargon, no pressure.
Spouse exemption and gifts
Transfers between spouses and civil partners are exempt from inheritance tax, whether made during life or on death. Beyond that, several exemptions let you give money away during your lifetime:
| Exemption | Amount |
|---|---|
| Annual exemption | £3,000 a year (one unused year can be carried forward) |
| Small gifts | £250 per person, per year |
| Wedding gifts | £5,000 (child), £2,500 (grandchild), £1,000 (others) |
| Gifts from surplus income | Exempt if regular and out of normal income |
Larger gifts are potentially exempt transfers. If you survive seven years after making one, it falls outside your estate entirely. This is the well-known 7-year rule, and where a gift is made between three and seven years before death, taper relief can reduce the tax on it. Beware gifts with reservation of benefit, where you give something away but keep using it, as these are still counted as yours.
Pensions and the 2027 change
Pensions have traditionally sat outside the estate for inheritance tax. That is changing: from April 2027 most unused pension funds are expected to be brought within the scope of inheritance tax. If pensions form a large part of your wealth, this is a significant shift worth planning around now.
Paying inheritance tax
For taxable estates the personal representatives complete form IHT400 and pay the tax due. Key points:
- Inheritance tax is generally due by the end of the sixth month after the month of death.
- Tax on property and some other assets can be paid in instalments over ten years.
- Because tax is usually needed before the grant, many estates use the Direct Payment Scheme to pay HMRC straight from the deceased’s bank or building society accounts.
Getting the figures and reliefs right is where good advice pays for itself, both in tax saved and in avoiding penalties.
What Will Probate Cost? Get an Estimate in 60 Seconds
Answer three quick questions and see a fee estimate based on the estate — no personal details required to start.
📊 Get Fee EstimateSpeak to an inheritance tax specialist
If you are administering a taxable estate, or want to plan ahead to reduce a future bill, Curtis Legal can help. We advise families across Torfaen and South Wales. Call 0800 214 216 for a same-day callback.
About the author
Written by Simon Jenkins, Director and Solicitor at Curtis Legal. SRA 167489. Firm SRA 450129. Simon leads the Curtis Legal private client team and advises families across South Wales on inheritance tax, estate planning and probate. He aims to make a complex tax understandable.
This article is general information about the law in England and Wales and is not a substitute for tailored legal or tax advice. Sources: GOV.UK, Inheritance Tax and HMRC thresholds and interest rates.
