UK Inheritance Tax 2026: Thresholds, Rules & How to Reduce Your Bill

Updated April 2026 | Kaeltripton.com

Inheritance tax (IHT) affects more UK estates every year as property prices rise and thresholds remain frozen. This guide covers current rules, thresholds, and legitimate ways to reduce your IHT liability.

What Is the Inheritance Tax Threshold in 2026?

The standard nil-rate band remains at £325,000 per person. Estates above this are taxed at 40% on the excess. The residence nil-rate band adds up to £175,000 when passing a main home to direct descendants, giving couples a combined threshold of up to £1 million.

Key Exemptions and Reliefs

Spouse exemption: Transfers between UK-domiciled spouses are fully exempt with no limit.

Annual gift exemption: Give away up to £3,000 per tax year free of IHT. Unused allowance carries forward one year.

7-year rule: Gifts made more than 7 years before death are generally exempt. Gifts within 7 years may attract taper relief.

Business Property Relief: Qualifying business assets attract 50–100% IHT relief.

Agricultural Property Relief: Agricultural land can qualify for up to 100% relief.

2026 Changes to Watch

From April 2027, inherited pension pots will be brought into scope for IHT. Agricultural and business property relief changes from the 2024 Autumn Budget also take effect from April 2026, capping relief at £1 million for some assets.

This article is for informational purposes only and does not constitute financial advice. Always verify rates with official sources before making any financial decision.

Frequently Asked Questions

Q: What is the IHT threshold in 2026?
The nil-rate band is £325,000. With the residence nil-rate band, a single person can pass up to £500,000 and couples up to £1 million free of IHT.

Q: Do you always pay 40%?
Only on the portion above the threshold. Leaving 10%+ to charity reduces the rate to 36%.

Q: Are pensions subject to IHT?
Currently no — but from April 2027 inherited pensions will be brought into the IHT net.