Answers · UK 2025/26
How do IHT nil-rate bands work and what is the total tax-free threshold for couples?
Each person has a Nil-Rate Band (NRB) of GBP 325,000 and a Residence NRB (RNRB) of GBP 175,000 for a qualifying home passed to descendants. Married couples can transfer unused bands, giving a potential combined threshold of GBP 1,000,000. IHT at 40% applies to the estate above the available bands.
Full answer
Inheritance Tax (IHT) is charged at 40% on the portion of an estate exceeding the available nil-rate bands. Planning around these bands is central to most IHT strategies. Nil-Rate Band (NRB) GBP 325,000 per person, frozen at this level until at least 2030. The NRB applies to the total chargeable estate (after deducting liabilities, funeral costs, and exemptions such as the spouse/civil partner exemption and charitable giving). Residence Nil-Rate Band (RNRB) GBP 175,000 additional allowance (from 2020/21, also frozen to 2030). Conditions: -- The deceased must have owned a qualifying residential property at death (or have downsized/sold after July 2015) -- The property (or downsizing addition) must pass to direct descendants (children, grandchildren, step-children, adopted children) RNRB taper for large estates The RNRB is reduced by GBP 1 for every GBP 2 by which the net estate exceeds GBP 2,000,000. At GBP 2,350,000, the RNRB is fully withdrawn. Transferable nil-rate bands for married couples / civil partners When the first spouse/civil partner dies, any unused NRB and RNRB are transferred to the survivor's estate. Unused means the proportion not used on the first death -- for most couples who leave everything to each other (fully exempt as spouse transfer), 100% of both bands transfer. Maximum combined threshold for a couple -- Survivor's NRB: GBP 325,000 -- Transferred NRB: GBP 325,000 -- Survivor's RNRB: GBP 175,000 -- Transferred RNRB: GBP 175,000 -- Total: GBP 1,000,000 This assumes the estate is not above GBP 2M (no RNRB taper) and a qualifying property is passed to direct descendants. Gifts and the 7-year rule Gifts to individuals (Potentially Exempt Transfers, PETs) fall outside the estate if the donor survives 7 years. Gifts within 7 years use up the NRB first. Taper relief reduces IHT on PETs made 3-7 years before death.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.