This guide is general information about the law in England and Wales, not legal advice. Every situation is different, so please speak to us or another qualified adviser before acting on it.
The key numbers for 2026
| Allowance or rate | Amount |
|---|---|
| Nil-rate band (the basic tax-free threshold) | £325,000 |
| Residence nil-rate band (when your home goes to children or grandchildren) | Up to £175,000 |
| Maximum for one person, including the home | £500,000 |
| Maximum for a married couple or civil partners, using unused allowances | £1,000,000 |
| Residence nil-rate band starts to reduce on estates over | £2,000,000 |
| Standard rate on the amount above the threshold | 40% |
| Reduced rate if 10% or more of the net estate goes to charity | 36% |
The government has said these thresholds will stay frozen until 5 April 2031. Because they don't rise with inflation or house prices, more estates are expected to pay inheritance tax over time.
How the basic threshold works
Inheritance tax is charged on your estate, meaning your property, money and possessions, minus debts, when you die. GOV.UK says there's normally no inheritance tax to pay if either:
- the estate is worth less than the £325,000 threshold, or
- everything above the threshold is left to your spouse or civil partner, a charity or a community amateur sports club.
Tax is only charged on the part above the threshold. GOV.UK's example: on an estate worth £500,000 with a £325,000 threshold, the tax is 40% of £175,000. That's £70,000. Even if no tax is due, the estate may still need to be reported to HMRC.
The residence nil-rate band: your home
If you leave your home, or your share of it, to your children or grandchildren, your threshold can rise by up to £175,000, to £500,000. Children here include adopted, foster and stepchildren. The extra allowance:
- only applies to a home you've lived in, passing to direct descendants
- reduces by £1 for every £2 that the estate is worth over £2 million
- doesn't apply if the home goes to nephews, nieces, friends or an unmarried partner
How your will is worded can affect whether the allowance is available, which is one reason to keep your will up to date.
Married couples and civil partners: up to £1 million
Anything you leave to a husband, wife or civil partner is normally free of inheritance tax. GOV.UK also says that if your estate is worth less than your threshold, any unused threshold can be added to your partner's threshold when you die. That applies to both the basic band and the residence band. So a couple who leave everything to each other, and then their home to their children, can potentially pass on up to £1 million without inheritance tax.
Unmarried couples don't get this. There's no spouse exemption and no transfer of unused allowances between cohabiting partners, so a gift to a partner can be taxed if the estate is over the threshold. If there's no will, a cohabiting partner doesn't inherit anything at all (see what happens if you die without a will).
Pensions: the big change from 6 April 2027
Until now, most unused defined contribution pension pots have been outside the estate for inheritance tax. GOV.UK confirms that from 6 April 2027, the government will bring most unused pension funds and death benefits into scope of inheritance tax. The change was legislated in the Finance Act 2026.
- Death-in-service benefits from a registered pension scheme are excluded.
- Pensions left to a spouse or civil partner still benefit from the spouse exemption.
- The personal representatives (executors) will be responsible for reporting and paying any tax due on pensions. They can ask pension schemes to hold back 50% of taxable benefits for up to 15 months to cover it.
For many people with a home, savings and a sizeable pension, this could push the estate over the threshold for the first time. Our free 2027 pension IHT checker gives you a quick estimate of the before-and-after figures.
Gifts and the 7-year rule
Gifts you make during your lifetime can reduce your estate, but some are added back if you die within 7 years. GOV.UK sets out these exemptions:
- Annual exemption: £3,000 of gifts each tax year, and you can carry any unused amount forward for one year only.
- Small gifts: up to £250 per person per tax year, as long as you haven't used another allowance on the same person.
- Wedding or civil partnership gifts: up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else.
- Regular gifts from income: exempt if you can afford them after meeting your usual living costs.
- Gifts to a UK-resident spouse or civil partner, charities and political parties: exempt.
Other gifts become tax-free if you live for 7 years after making them. If you die sooner and tax is due on the gift, taper relief reduces the rate for gifts made 3 to 7 years before death: 32%, 24%, 16% and then 8%. Taper relief only applies if the total gifts in those 7 years are over the £325,000 threshold. A "gift with reservation", such as giving your home to your children but carrying on living there rent-free, still counts as part of your estate.
What you can do
- Check your likely estate value, including your home, savings, investments, life cover not written in trust and, from April 2027, unused pensions.
- Make or update your will so allowances such as the residence band are used as intended. Couples often choose mirror wills.
- Keep records of gifts, because your executors will need to work out what you gave in the 7 years before your death.
- Get regulated advice if your estate is complex. We prepare wills and LPAs and can explain how the thresholds work, but we don't give regulated financial or tax advice. If you need it, we'll suggest you speak to an independent financial adviser or tax adviser.
Frequently asked questions
What is the inheritance tax threshold in 2026?
The nil-rate band is £325,000. You may get up to £175,000 more (the residence nil-rate band) if your home goes to your children or grandchildren, so up to £500,000 per person, or £1 million for a married couple or civil partners.
Will my pension be taxed when I die?
From 6 April 2027, most unused pension funds and death benefits will count towards your estate for inheritance tax. Death-in-service benefits are excluded, and pensions left to a spouse or civil partner still benefit from the spouse exemption.
Do unmarried couples get the £1 million allowance?
No. Only married couples and civil partners can pass on unused allowances and benefit from the spouse exemption.
Who pays the inheritance tax?
Normally the executor or administrator pays it from the estate. Beneficiaries don't usually pay tax on what they inherit, although someone who received a large gift within 7 years of the death may have to.
When will the thresholds go up?
The government has said the thresholds will stay frozen until 5 April 2031.
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Sources: GOV.UK: How Inheritance Tax works; GOV.UK: Inheritance Tax – passing on a home; GOV.UK: Inheritance Tax – gifts; GOV.UK: Inheritance Tax – unused pension funds and death benefits; HMRC: Check if an estate qualifies for the residence nil rate band; HM Treasury: Budget 2025 overview of tax legislation and rates (thresholds fixed to 5 April 2031). Checked 23 October 2026.