Inheritance Tax UK 2026 — £325k NRB Frozen to April 2031, RNRB and the £1m Couple Allowance

UK inheritance tax (IHT) is charged at 40% on the value of an estate above the available threshold. The two key allowances — the nil-rate band (NRB) at £325,000 and the residence nil-rate band (RNRB) at £175,000 — were already frozen to 2030. The November 2025 Budget extended the freeze by another year, locking both at current levels until April 2031. Combined with rising property values and the April 2027 change bringing pension pots into IHT scope, the practical IHT bill faced by ordinary UK families is rising even though the headline rate has not changed since 2009.

The two thresholds — in plain English

Every individual has two tax-free allowances when they die:

• Nil-rate band (NRB) — £325,000. Available to everyone, applies against any kind of asset. Frozen at this level since April 2009.
• Residence nil-rate band (RNRB) — £175,000. Only applies if you leave a qualifying home (or share of one) to direct descendants — children, stepchildren, adopted children, foster children, grandchildren or their descendants.

An unused threshold transfers to a surviving spouse or civil partner. That is why married couples and civil partners can effectively pass on up to £1 million tax-free if a qualifying home goes to direct descendants — two NRBs of £325,000 plus two RNRBs of £175,000.

Key 2026 UK inheritance tax figures

The RNRB taper — how the £2 million cliff works

The residence nil-rate band tapers down on larger estates. For every £2 of estate value above £2 million, you lose £1 of RNRB. That means:

Once your estate crosses £2.35 million as a single individual, or £2.7 million as a couple claiming a transferred RNRB, the residence allowance disappears entirely. Only the £325,000 NRB (or £650,000 between two spouses) remains.

Three worked examples

Single homeowner, no spouse — estate £600,000 with home

Estate value: £600,000, of which £400,000 is the family home left to children.
Available NRB: £325,000. Available RNRB: £175,000 (home goes to direct descendants).
Total tax-free threshold: £500,000.
Taxable estate: £600,000 − £500,000 = £100,000.
IHT due at 40%: £40,000.

Married couple, second death — estate £950,000 with home

First spouse died in 2018 leaving everything to the survivor (spouse exemption — no IHT). Their full NRB (£325,000) and RNRB (£175,000) transfer to the survivor.
Survivor dies in 2026, estate worth £950,000, family home worth £550,000 left to children.
Available threshold: 2× £325,000 + 2× £175,000 = £1,000,000.
Taxable estate: £950,000 − £1,000,000 = £0.
IHT due: nil. The full £1 million couple allowance covers the estate.

Cohabiting couple (unmarried) — estate £600,000 with home

Cohabiting partners do not qualify for the spouse exemption or for transferring unused NRB/RNRB.
Same headline numbers as the first example: estate £600,000, home left to a direct descendant.
Available threshold: £500,000.
Taxable estate: £100,000. IHT due: £40,000.
If the home is left to the surviving partner instead of a direct descendant, the RNRB does not apply at all — taxable estate becomes £275,000 and IHT jumps to £110,000. This is one of the most expensive tax cliffs in the UK system.

What the November 2025 Budget changed

The Autumn Budget 2025, delivered on 26 November 2025, made two consequential IHT changes for 2026 onwards:

• Threshold freeze extended to April 2031. The NRB, RNRB and £2m taper threshold were already locked to 2030 — now extended by a further year. By 2031 the £325,000 NRB will have been frozen for 22 years.
• APR/BPR cap raised from £1m to £2.5m for farmers. The original Autumn 2024 Budget capped 100% Agricultural Property Relief and Business Property Relief at the first £1 million of qualifying assets per person, with 50% relief above. After sustained farming-sector consultation, this was raised in December 2025 to £2.5 million per person, fully transferable between spouses (so up to £5 million for a couple). Above the cap, relief drops to 50% — equivalent to a 20% effective IHT rate.

HMRC's December 2025 Tax Information and Impact Note estimates only around 185 estates claiming APR are expected to pay more IHT in 2026/27; 85% of APR estates will be unaffected. The overall freeze, by contrast, affects everyone with a growing estate.

April 2027 — when pension pots come into IHT scope

Most defined-contribution UK pension pots have historically sat outside the estate for IHT purposes — passing to nominated beneficiaries free of inheritance tax. From 6 April 2027, that changes. Inherited pension pots will fall within IHT, meaning a pension that previously transferred tax-free could become a taxable component of the estate.

Two practical implications: estates that already use the full £1m couple allowance will see pension assets layered on top, potentially crossing the £2m taper threshold and losing some or all of the RNRB. Anyone relying on pensions as a tax-free wealth-transfer mechanism should review the position with a qualified adviser before April 2027 — the rule change is well-flagged but the planning window is finite.