Allowances & rates: Inheritance Tax

What are the current rates and allowances for Inheritance Tax (IHT)?

This is a freeview 'At a glance' guide to Inheritance Tax (IHT) rates and allowances.

  From 2008-09 To 2008-09
Nil-rate band*/** £325,000 312,000
Lifetime rate 20% 20%
Death rate 40% 40%
Death rate where 10% or more left to charity 36% (from 2014-15)  

*Increased by any unused portion of a predeceased spouse or civil partner's nil rate band.  Autumn Budget 2025 proposed that the NRB is frozen until 5 April 2031.

**From April 2017, an additional Residence Nil Rate Band (RNRB) is available to cover a home of the deceased. This has been phased in, beginning at £100,000 per individual and increasing by £25,000 each year until it reached £175,000 in 2020-21.  Autumn Budget 2025 proposed that the RNRB is frozen until 2031. See Main Residence Nil Rate Band.

Tax is payable within six months of the end of the month of death e.g. a death in December 2025 will mean the IHT must be paid by 30 June 2026. 

See: Estate planning checklist

At a glance

Rates & Allowances

  • It is proposed that the IHT thresholds will remain at their current levels for a further year until 5 April 2031. 

    Individuals will be entitled to:

    • £325,000 Nil Rate Band (NRB).
    • £175,000 Residence Nil Rate Band (RNRB).
      • RNRB will continue to be tapered at a rate of £1 for every £2 where the net value of the estate exceeds £2 million.
     The nil rate band is transferable between spouses and civil partners. See IHT: Transferable Nil Rate Band

Non-UK residents

From 6 April 2025, an individual's non-UK assets are within the scope of IHT if the individual is a long-term UK resident. 

  • Residence status for this purpose is determined under the Statutory Residence Test (SRT).
  • An individual is a 'long-term' UK resident if they have been resident in the UK for 10 out of the last 20 years preceding death or a chargeable event.

Where an individual is a long-term UK resident and subsequently becomes non-UK resident, they will remain in scope for IHT for a minimum of three years and a maximum of 10 years, depending on the amount of time they resided in the UK.

  • Those who are resident between 10 and 13 years remain in scope for the minimum period of three tax years.
  • This increases by one tax year for each additional year of residence up to a maximum of 10 tax years.
  • See Non-Domicile: Rules from 6 April 2025

Charitable donations

If a donation of at least 10% of the net value of the estate is made to charity the IHT rate applying to that estate decreases to 36%. The charity concerned will receive more if a donor is able to donate under the Gift Aid scheme whilst alive because the charity will be able to receive a basic rate tax credit. See IHT discount on charitable donations.

Business Property Relief (BPR) and Agricultural Property Relief (APR)

BPR

Exemptions   
Business property: a business, an interest in a business and unquoted securities with control. 100%
A controlling interest in a listed company 50%
Assets used by the transferor's controlled company or partnership, assets held in a trust of which the deceased was a beneficiary and used in their business 50%
Unquoted shares, including AIM shares 50%

 * Relevant business property must usually have been owned for at least two years prior to transfer/death.

APR (either 100% or 50%)

Given on the agricultural value of agricultural property which has been:

  • Occupied by the owner for the purposes of agriculture for two years ending with the date of the transfer (death).
  • Owned by them for seven years ending with that date and occupied throughout by them or another for the purposes of agriculture.

BPR and APR reforms were announced in the Autumn Budget 2024, with further changes being announced in the Autumn Budget 2025.   

From 6 April 2026:

  • A new £2.5 million allowance will apply to the combined value of business and agricultural property assets that qualify for 100% relief under APR or BPR. 
    • The new allowance is in addition to the existing nil-rate bands and exemptions.
  • Where the combined value of business and agricultural property assets exceeds the £2.5 million allowance, the rate of relief will be reduced to 50% on the value of any qualifying relievable property over the £2.5 million allowance.
  • For individuals, the £2.5 million allowance will cover:
    • Property in an estate at death.
    • Lifetime transfers to individuals in the seven years before death (failed Potentially Exempt Transfers (PETs)).
    • Chargeable Lifetime Transfers (CLTs) where there is an immediate lifetime charge (e.g. most transfers into trust).
  • Any unused allowance will be transferable between spouses and civil partners. 

For further details see: the Private Client section for IHT: Business Property Relief and IHT: Agricultural Property Relief.

Exempt gifts

Certain gifts are exempt from IHT including those within the £3,000 annual exemption, small gifts of £250 per person per tax year, gifts of surplus income and certain gifts on marriage.

See IHT: Gifts

Potentially Exempt Transfers (PETs)

Other gifts are taxable if the transferor dies within seven years of making the gift with a reduced charge (taper relief) if they survive at least three years.   

See IHT: Gifts