Inheritance Tax nil-rate bands explained

The standard nil-rate band

Inheritance Tax takes 40% of an estate's value above the nil-rate band — the tax-free slice everyone gets. For 2026/27 that's £325,000 per person, a figure that's been frozen since 2009 (yes, really — over fifteen years without moving). Leave anything to a spouse, civil partner or registered charity, though, and it's exempt entirely, no matter the value, and it doesn't even touch your nil-rate band.

The residence nil-rate band

There's a second allowance on top — £175,000 — if the main home goes to children, grandchildren or other direct descendants. Stack it with the standard band and most people can pass on up to £500,000 tax-free, as long as a home's involved and it's going to direct descendants.

It does taper away for bigger estates, though: £1 lost for every £2 the estate sits above £2 million, gone completely by £2.35 million.

Why some couples can shelter up to £1 million

Here's the bit that surprises people: any nil-rate band your spouse didn't use gets transferred to you when they die. Leave everything to each other first, then to the kids on the second death, and a couple can combine up to £650,000 of standard nil-rate band with £350,000 of residence nil-rate band — £1 million, tax-free, before the 40% rate even enters the conversation (assuming neither of you used up your own allowance earlier on other gifts).

What else affects the bill

Gifts made in the seven years before death can still count against the nil-rate band, under what's called taper relief — the tax on them reduces the longer before death they were made. Go further back than seven years with a gift and it generally falls outside the estate altogether.

Our Inheritance Tax Calculator folds in both nil-rate bands — plus any transferred from a spouse — to give you a working estimate.