Comparison · Inheritance Tax · 2026/27
Nil-Rate Band vs Residence Nil-Rate Band UK IHT 2026/27
The standard nil-rate band (GBP 325,000) applies to every estate, no questions asked. The residence nil-rate band (GBP 175,000) is an additional allowance layered on top, but only if you own a qualifying home left to direct descendants -- and it tapers away entirely for estates above GBP 2 million. This 2026/27 guide explains how the two allowances combine, transfer between spouses, and apply to a worked GBP 1 million estate.
Key facts -- 2026/27
- • Nil-rate band (NRB): GBP 325,000 per person, universal
- • Residence nil-rate band (RNRB): GBP 175,000, home left to direct descendants only
- • Combined single-person allowance: up to GBP 500,000
- • RNRB taper threshold: estates above GBP 2 million (GBP 1 lost per GBP 2 over)
- • Transferable between spouses/civil partners: up to 100% of unused NRB and RNRB
- • Main IHT rate: 40% on the excess (36% if 10%+ left to charity)
- • Both bands frozen: until April 2030
How the Two Allowances Stack
Think of the NRB as the base allowance every estate gets automatically, and the RNRB as a conditional top-up:
- GBP 325,000 NRB -- applies to any estate, any assets, any beneficiaries
- + GBP 175,000 RNRB -- only if a qualifying home passes to direct descendants
- = GBP 500,000 potential single-person tax-free threshold
- x2 with spousal transfer -- up to GBP 1,000,000 for a surviving spouse's estate
Only the value of the estate above the combined applicable allowances is taxed, and only at 40% (or 36% with sufficient charitable giving).
Worked Example: GBP 1,000,000 Estate, Home Left to Children
A widow dies with a GBP 1,000,000 estate, including a home worth GBP 400,000 left entirely to her two children. She inherited 100% of her late husband's unused NRB and RNRB.
| Allowance | Amount |
|---|---|
| Own nil-rate band | GBP 325,000 |
| Transferred nil-rate band (late spouse, 100%) | GBP 325,000 |
| Own residence nil-rate band | GBP 175,000 |
| Transferred residence nil-rate band (100%) | GBP 175,000 |
| Total tax-free threshold | GBP 1,000,000 |
| IHT due | GBP 0 |
Because the full estate value equals the combined available allowances, no inheritance tax is due at all. A similar single (non-widowed) person with the same GBP 1,000,000 estate but only their own GBP 500,000 combined allowance would face 40% tax on the remaining GBP 500,000 -- a GBP 200,000 IHT bill. Use the inheritance tax calculator for your own estate.
Side-by-Side Comparison
| Factor | Nil-rate band | Residence nil-rate band |
|---|---|---|
| Amount | GBP 325,000 | GBP 175,000 |
| Conditions | None -- universal | Qualifying home to direct descendants |
| Taper for large estates | No taper | Tapers above GBP 2m estate |
| Transferable to spouse | Yes, up to 100% | Yes, up to 100% |
| Downsizing protection | N/A | Yes -- since 8 July 2015 |