Inheritance Tax (IHT)
UK tax glossary · Last reviewed: April 2026
Inheritance Tax (IHT) is charged at 40% on the value of an estate exceeding the nil-rate band (NRB) of £325,000. The NRB has been frozen at this level since 2009 and will remain frozen until 2030. Spouses and civil partners can transfer any unused NRB to each other, giving a combined NRB of up to £650,000.
The Residence Nil-Rate Band (RNRB) adds up to £175,000 if a main residence is passed to direct descendants (children or grandchildren), giving a potential combined family allowance of £1 million per couple. The RNRB tapers by £1 for every £2 of estate value above £2 million.
Agricultural Property Relief (APR), Business Property Relief (BPR), and gifts out of income can significantly reduce IHT. Gifts made more than 7 years before death are generally exempt. Most charitable legacies are also exempt, and leaving 10% or more of the estate to charity reduces the IHT rate to 36%.
Worked example
Estate: £800,000. Nil-rate band: £325,000. RNRB (home left to children): £175,000. Taxable estate: £800,000 − £500,000 = £300,000. IHT at 40%: £120,000. Effective rate on total estate: 15%.
Common questions
Does the surviving spouse pay IHT when their partner dies?
No — transfers between spouses and civil partners are exempt from IHT regardless of size. The unused nil-rate band of the first spouse to die transfers to the survivor's estate for use on the second death.
Are pensions included in my estate for IHT?
Currently, pension pots are generally outside your estate. However, from April 2027, most unused pension funds will become subject to IHT. Seek advice if your pension forms a significant part of your wealth.
Related resources
TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.