Rates & allowances
Inheritance tax — UK rates and thresholds
Nil-rate band, residence nil-rate band and main rate.
2026/27
Inheritance tax
- Nil-rate band£325,000
- Residence nil-rate band£175,000 Tapered if estate over £2m
- Lifetime rate£20 %
- Death rate£40 %
- Death rate with 10%+ to charity£36 %
- Annual exemption£3,000
- Small gifts allowance£250
- Marriage gift — parent£5,000
- Marriage gift — grandparent£2,500
- Marriage gift — other£1,000
Taper relief: 0–3 yr 100% · 3–4 yr 80% · 4–5 yr 60% · 5–6 yr 40% · 6–7 yr 20%.
IHT rates at a glance
| Situation | Rate |
|---|---|
| Death rate (above nil-rate band) | 40% |
| Death rate where ≥10% of net estate left to charity | 36% |
| Lifetime rate on chargeable transfers | 20% |
| Tapered relief on gifts (3–7 years before death) | 8–32% |
Gifts more than seven years before death are normally outside the estate. Taper relief reduces the rate on gifts made 3–7 years before death.
Inheritance Tax (IHT) overview
IHT can be charged on your estate when you die, and on some gifts made in the seven years before death. Each person has a nil-rate band, with an additional residence nil-rate band where a home passes to direct descendants. Estates above the bands are taxed at the death rate, reduced where enough is left to charity.
Lifetime planning — gifts, trusts and reliefs — can reduce or remove the charge. Our inheritance tax and estates & wills services help you pass on more of your wealth.
The bands, and the one most people miss
There is a nil-rate band available to everyone, and a further residence nil-rate band where a home passes to direct descendants. The residence band tapers away for larger estates, which produces a range where each extra pound of estate value costs considerably more than the headline rate.
The part most people do not know is that unused bands transfer between spouses and civil partners. A widow or widower can often claim both their own and their late spouse's allowances, which can double the amount passing free of tax — but it has to be claimed, with evidence from the first death, sometimes decades later. Keep the paperwork.
Gifts and the seven-year rule
Most gifts fall out of the estate after seven years. Between three and seven, taper relief reduces the tax on the gift, though it is often misunderstood — the taper reduces the tax on the gift itself, not the tax on the rest of the estate.
There are also gifts that are exempt immediately: an annual allowance, small gifts, gifts on marriage, and — the most underused of all — regular gifts made out of surplus income, which are exempt from the moment they are made provided they are genuinely regular and genuinely affordable out of income. That one requires records to survive scrutiny, and it is worth keeping them from the start.
Frequently asked
How much can I pass on tax-free?+
The nil-rate band, plus the residence nil-rate band where your home passes to children or grandchildren. Married couples and civil partners can combine unused bands. See the figures above.
Are gifts taxable?+
Gifts more than seven years before death are normally outside the estate. Gifts made within seven years may be taxable, with taper relief reducing the rate over time.
Can I use my late spouse's allowance?+
Usually, yes. Unused nil-rate band and residence nil-rate band transfer to the surviving spouse or civil partner, which can double what passes free of tax. It has to be claimed with evidence from the first death, however long ago — which is why the paperwork from a first estate is worth keeping permanently.
How much can I give away each year?+
There is an annual exemption, plus small gifts to any number of people, and larger exempt gifts on marriage. Beyond that, most gifts leave the estate after seven years. The most valuable and least used exemption is for regular gifts out of surplus income, which is immediate — but it needs records showing the pattern and that it came from income rather than capital.
Rates in context
Knowing the rate is not the same as knowing the bill.
Thresholds interact — allowances taper, reliefs stack, and the order you take income in changes the total. We plan for that.
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