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The UK's inheritance tax rules are undergoing significant changes in 2026. The nil-rate band freeze continues, a new cap on farm and business relief takes effect, and pensions join the IHT net from April 2027. Here's everything you need to know. Updated April 2026 UK Inheritance Tax Thresholds 2026/27
Source: GOV.UK inheritance tax rates and allowances; GOV.UK press release 23 December 2025 (APR/BPR cap increase). All thresholds frozen until April 2031 (extended from 2029/30 in Autumn Budget 2025). The April 2026 Agricultural & Business Property Relief ChangesFrom 6 April 2026, the rules on IHT relief for farms and family businesses changed fundamentally:
Around 85% of estates claiming agricultural property relief in 2026-27 are forecast to pay no more inheritance tax as a result of these changes. Source: GOV.UK press release 23 December 2025. The IHT due on APR/BPR assets can be paid in interest-free instalments over 10 years. How Inheritance Tax Is Calculated — ExampleExample: A couple own a home worth £700,000 and other assets of £300,000 (total estate £1,000,000). The second spouse to die has: NRB £325,000 + transferred NRB £325,000 + RNRB £175,000 + transferred RNRB £175,000 = £1,000,000 total allowance. Result: £0 IHT. Now adjust: if their estate is worth £1,200,000, the taxable excess is £200,000. IHT = 40% × £200,000 = £80,000. The Seven-Year Gift Rule
Gifts made more than 7 years before death are completely free of IHT. Note: this only applies to gifts above the annual £3,000 exemption and other specific exemptions. Gifts within 7 years are potentially exempt transfers (PETs) and may be subject to IHT if the donor dies within the 7-year period. Key IHT Exemptions and Reliefs
Pensions and IHT — Major Change from April 2027Currently (until 5 April 2027), defined contribution pensions are not subject to inheritance tax. This makes them one of the most tax-efficient assets to hold for estate planning. From 6 April 2027, unspent pension funds will become subject to IHT as part of the estate. If you have significant pension savings, this is an important planning consideration — the window to use pensions as IHT-free wealth transfer is closing. Take professional advice urgently if this affects you. KAELTRIPTON VERDICT UK inheritance tax is increasingly complex following the April 2026 APR/BPR changes and the forthcoming pension reforms in April 2027. Couples with estates under £1 million can pass assets tax-free using the NRB and RNRB. Farm and business owners with assets between £2.5m and £5m per couple are protected by the new cap. Anyone with larger estates — or significant pension savings — should seek professional IHT advice urgently. Updated April 2026 — Rates from GOV.UK Q: What is the inheritance tax threshold UK 2026? A: £325,000 nil-rate band per person. Up to £1,000,000 for a married couple with a main home passing to direct descendants. Frozen until April 2031. Q: What changed with IHT in April 2026? A: APR/BPR 100% relief capped at £2.5m per person (was unlimited). Assets above cap get 50% relief (effective 20% IHT rate). IHT nil-rate bands frozen until 2031. Source: GOV.UK December 2025. Q: What is the IHT rate in the UK? A: 40% on the estate above the nil-rate band. 36% if 10%+ of estate goes to charity. Q: How do I reduce inheritance tax? A: Annual gift exemption £3,000/year, spouse exemption, regular gifts from income, charitable giving, 7-year gift rule, pension contributions (until April 2027), and APR/BPR for qualifying assets. Related Articles This article is for informational purposes only and does not constitute financial or tax advice. Always consult a qualified accountant or tax adviser for your personal circumstances. All rates and figures verified from GOV.UK and official sources, April 2026. |
UK Inheritance Tax 2026: Thresholds, Rates & How to Reduce Your Bill
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