Inheritance Tax Thresholds for 2026/27 Explained

Inheritance tax in the UK is charged on the value of an estate above a set of tax-free thresholds. For 2026/27 those thresholds are unchanged from recent years, but the way they combine, taper, and transfer between spouses means the allowance actually available to a given estate can range from £325,000 to £1,000,000. Understanding which thresholds apply, and in what order, is the foundation of any sensible estate plan.

This article sets out the figures for 2026/27 and explains how each one behaves. It sits within our Inheritance Tax: A Complete UK Guide, which covers the wider picture. If you want this applied to your own estate, we can handle this through our inheritance tax planning service at /services/inheritance-tax-planning.

The nil-rate band

The nil-rate band is the core inheritance tax threshold. For 2026/27 it is £325,000 per person. The first £325,000 of an estate is taxed at zero per cent; value above it is potentially chargeable at the standard rate. The nil-rate band has been frozen at £325,000 since 2009, and because it has not risen with inflation, more estates fall within its reach each year. This is sometimes called fiscal drag.

The nil-rate band applies to everyone, regardless of who inherits. It is the starting point before any additional allowances are considered.

The residence nil-rate band

The residence nil-rate band is an additional threshold of up to £175,000 for 2026/27. It applies only where a residence, or a share of one, passes to direct descendants such as children, stepchildren, adopted children, or grandchildren. It does not apply if the home passes to a sibling, a niece or nephew, or a friend.

The residence nil-rate band is capped at the value of the home if that is lower than £175,000. It also tapers away for larger estates, as explained below. Provisions exist for people who have downsized or sold their home before death, so the allowance is not always lost simply because the property is no longer owned.

The taper for large estates

The residence nil-rate band is reduced where the net estate exceeds £2,000,000. For every £2 of value above that £2,000,000 threshold, the residence nil-rate band is reduced by £1. This means a single person with a net estate of £2,350,000 or more loses the entire £175,000 residence nil-rate band, and a couple can lose both.

The taper catches a surprising number of estates once a family home in the South East and modest investments are added together. It is one of the reasons larger estates often benefit most from planning, because steps taken in lifetime can bring the net estate back below the £2,000,000 line.

Spouse transfers and the couple position

Transfers between spouses and civil partners are exempt from inheritance tax, both in lifetime and on death, where both are UK-domiciled. Just as importantly, any unused nil-rate band and unused residence nil-rate band transfer to the surviving spouse. This is what allows a married couple or civil partners to combine allowances.

In practice this means a couple can pass on up to £1,000,000 free of inheritance tax: two nil-rate bands of £325,000 plus two residence nil-rate bands of £175,000, provided the home passes to direct descendants and the estate is not large enough to trigger the taper. Our lifetime gifting service at /services/lifetime-gifting and our wills and estate structuring service at /services/wills-and-estate-structuring both help couples make sure these allowances are not wasted.

The 2026/27 thresholds at a glance

How the rate works above the thresholds

Value above the available thresholds is charged at 40 per cent. There is a reduced rate of 36 per cent where 10 per cent or more of the net estate, measured after deducting the nil-rate band and other reliefs, is left to charity. The reduced rate can mean the charitable gift costs the family less than its headline value, because the lower rate applies to the whole taxable estate.

Why the headline number rarely tells the full story

The thresholds look simple, but the interaction between them is where most estates differ. Whether a residence nil-rate band is available, whether the taper bites, and whether a spouse transfer has been used all change the figure dramatically. The points below are the ones that most often catch families out.

• An unmarried couple cannot transfer unused allowances to each other, so the £1,000,000 combined figure does not apply to them.
• Leaving the home to grandchildren can preserve the residence nil-rate band where there are no surviving children.
• A net estate just over £2,000,000 can lose more in tapered allowance than the value that pushed it over the line.
• A second marriage can mean more than two nil-rate bands are in play, since unused bands carry forward from earlier spouses.
• Business and agricultural assets are valued under their own rules before the thresholds are applied.

Common questions

Will the thresholds rise in 2026/27?

No. The nil-rate band remains at £325,000 and the residence nil-rate band at up to £175,000. Both are frozen, which is why more estates become liable over time even without rising wealth.

Does the residence nil-rate band apply if I rent rather than own?

The residence nil-rate band requires a qualifying residential interest passing to direct descendants. There are downsizing provisions for people who have sold a home, but a lifelong renter with no qualifying property interest would generally not have a residence nil-rate band to claim.

How do I work out my own available threshold?

It depends on your marital status, the value of your estate, who inherits the home, and any allowances carried forward from a late spouse. Because the interactions matter, many people have this modelled for them. We can do exactly that.