What Is the Inheritance Tax Nil-Rate Band? (UK 2025/26)

Inheritance Tax (IHT) is charged on the value of a person's estate when they die, if it exceeds certain thresholds. For 2025/26, the main nil-rate band is £325,000 — the first £325,000 of the estate is tax-free, and everything above it is taxed at 40%.

The Residence Nil-Rate Band

If you leave your home (or a share of it) to direct descendants — children, grandchildren, or their spouses — you get an additional tax-free amount called the residence nil-rate band (RNRB), set at £175,000 for 2025/26. Combined with the standard nil-rate band, this gives a potential IHT-free threshold of £500,000 per person.

Transferable Allowances for Couples

Any unused nil-rate band and residence nil-rate band can be transferred to a surviving spouse or civil partner. This means a married couple can potentially pass on up to £1 million (£325,000 + £175,000, doubled) before IHT applies.

The RNRB Taper

For estates valued above £2 million, the residence nil-rate band is reduced by £1 for every £2 above the £2 million threshold. It is completely withdrawn for estates worth £2.35 million or more.

The Freeze

The nil-rate band has been frozen at £325,000 since 2009, and the residence nil-rate band at £175,000 since 2020. Both are currently expected to remain frozen until at least April 2028. As property values and savings continue to rise, this freeze pulls more estates into IHT each year.