Every inheritance tax figure that matters, in one table
Inheritance tax has only two rates. Everything else is a question of which allowances an estate can actually use, and that is where the money is won and lost. Below is the complete set of figures for 2026/27, each checked against GOV.UK and HMRC guidance on 3 August 2026. This is general information rather than legal or financial advice. Inheritance tax is a UK-wide tax, so these figures apply in Scotland and Northern Ireland too.
| Item | 2026/27 figure | Key condition |
|---|---|---|
| Standard rate on death | 40% | Charged only on value above the available allowances |
| Reduced charity rate | 36% | At least 10% of the baseline amount passes to charity |
| Nil rate band | £325,000 | Every estate. Fixed at this level to the end of 2030/31 |
| Residence nil rate band | up to £175,000 | A qualifying home passing to direct descendants |
| Residence nil rate band taper | £1 lost per £2 | Applies to estates above £2,000,000, gone at £2.35m |
| Transferable allowances | up to £1,000,000 | A couple using two full nil rate bands and two residence bands |
| Spouse or civil partner exemption | unlimited | Capped at the nil rate band where the recipient is not a long-term UK resident |
| Gifts to charity | unlimited | Qualifying charities, in lifetime or by will |
| Annual gift exemption | £3,000 | Per tax year, carried forward one year only |
| Small gifts | £250 per person | Any number of people, provided no other allowance is used on them |
| Wedding gifts | £5,000 / £2,500 / £1,000 | To a child, a grandchild or great-grandchild, anyone else |
| Business and agricultural relief at 100% | £2,500,000 combined | From 6 April 2026, then 50% relief above the cap |
| Unused pension funds | in the estate | From 6 April 2027 |
To see how those figures land on a specific set of numbers, our IHT threshold calculator assembles the allowance stack for you, and our companion guide to how the threshold calculator works walks through what it does and does not model.
The two rates: 40%, or 36% with a charitable gift
GOV.UK states plainly that "the standard Inheritance Tax rate is 40%", charged on the value of an estate above the threshold. The word doing the work there is above. An estate of £600,000 with £500,000 of allowances pays 40% of £100,000, which is £40,000, not 40% of the whole estate. People routinely assume the opposite and conclude they owe six figures when they owe nothing.
The alternative rate is 36%, available where "you leave 10% or more of the 'net value' to charity in your will". The 10% is not measured against the headline estate. HMRC's Inheritance Tax Manual at IHTM45002 defines the test against the baseline amount: broadly the value transferred after liabilities, reliefs, exemptions and the available nil rate band have come off, with the charitable gift added back. Because the nil rate band is deducted first, the cash needed to hit 10% is usually a fraction of what people fear. Our guide to the reduced 36% rate works the arithmetic through in full.
The allowances that come off before the rate applies
Two allowances sit in front of the rate. The nil rate band is £325,000 and every estate gets it, whoever inherits. The residence nil rate band adds up to £175,000, but only where a qualifying home passes to direct descendants. HMRC's residence nil rate band guidance defines a direct descendant as "a child, grandchild or other lineal descendant" or "a spouse or civil partner of a lineal descendant", and is explicit that "direct descendants do not include nephews, nieces, siblings and other relatives". A house left to a sister gets nothing from this allowance.
Both figures are frozen. The HMRC thresholds table gives £325,000 and £175,000 as the current amounts, and the Budget 2025 measure published on 26 November 2025 fixes the thresholds "at their current levels for one further tax year in 2030 to 2031", alongside the £2 million taper threshold. So £325,000 and £175,000 now run to 5 April 2031 while asset values keep moving, which is why more estates become taxable each year. The full mechanics of the nil rate band, including how a transfer from a late spouse is claimed and why it is expressed as a percentage rather than a cash sum, are covered in our dedicated guide to the nil rate band.
Alongside them sits the spouse and civil partner exemption, which is not an allowance at all but a complete exemption: anything passing to a surviving spouse or civil partner is left out of the calculation entirely. HMRC's manual at IHTM11031 confirms transfers between spouses or civil partners are "wholly exempt", with one exception. For transfers on or after 6 April 2025, where the transferor is a long-term UK resident but the receiving spouse or civil partner is not, the exemption is capped rather than unlimited, which catches internationally mobile couples who assume it is automatic.
The taper that catches estates over £2 million
The residence nil rate band is means tested against the whole estate. Where the estate is worth more than £2,000,000, HMRC's guidance is that "the residence nil rate band will reduce by £1 for every £2 that the estate is worth more than the £2 million taper threshold". So:
- £2,100,000 estate: £100,000 over, £50,000 of allowance lost, £125,000 left.
- £2,200,000 estate: £75,000 left.
- £2,350,000 estate: the allowance is gone entirely for one person.
- £2,700,000 estate: gone entirely for a couple using two full residence bands.
Two details decide real cases. The £2 million test looks at the estate before reliefs and exemptions, so an estate expecting substantial business relief can still lose the residence band. And because each pound in the taper zone is taxed at 40% and also strips 50p of allowance, the effective marginal rate between £2,000,000 and £2,350,000 is 60%. From 6 April 2027 pension funds count towards the same £2 million line, as our guide to the RNRB taper and pensions works through.
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What you can give away, and what taper relief actually does
GOV.UK's gifts guidance sets out the exemptions that take a gift out of the reckoning the moment it is made: £3,000 a year in total, with any unused amount carried forward "but only for one tax year"; unlimited gifts of up to £250 per person, "as long as you have not used another allowance on the same person"; and wedding gifts of £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else. Regular gifts out of surplus income are exempt too, on conditions set out in our guide to the normal expenditure out of income exemption. Anything beyond those exemptions is a potentially exempt transfer, free of tax if the giver survives 7 years. If they do not, taper relief may reduce the tax, and this is where most consumer summaries go wrong, in two specific ways.
First, taper relief reduces the tax on the gift, never the value of the gift. A £400,000 gift made four years before death is still a £400,000 gift in the calculation. It still consumes the whole nil rate band. What tapers is the rate charged on the taxable slice.
Second, it only helps where the gifts exceed the nil rate band. GOV.UK is unambiguous: "Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold." Below that line there is no tax on the gifts, so there is nothing for the relief to reduce. Surviving three, four or five years changes nothing at all for ordinary gifting. Only the 7 year line matters.
| Years between gift and death | Rate on the taxable slice |
|---|---|
| Less than 3 | 40% |
| 3 to 4 | 32% |
| 4 to 5 | 24% |
| 5 to 6 | 16% |
| 6 to 7 | 8% |
| 7 or more | 0% |
Take Dominic, a single architect who gives his nephew £425,000 and dies five years and two months later. The nil rate band covers the first £325,000, leaving £100,000 taxable. At the 5 to 6 year rate of 16%, tax on the gift is £16,000 rather than £40,000. But his nil rate band is now spent, so his remaining estate is taxed from the first pound and taper relief does nothing about that. Had the gift been £260,000, no tax would be due on it at all and taper relief would be irrelevant. Our full treatment of taper relief on gifts and the 7 year rule covers who actually pays the tax on a failed gift, which is not always who you would expect.
Worked example: the allowance stack in practice
Rosalind and Peter were civil partners. Peter died in 2021 leaving everything to Rosalind, so nothing was taxable on his death and both of his allowances were unused and transferable. Rosalind dies in 2026 with an estate of £1,450,000, including a house worth £700,000 that passes to their two children.
- Nil rate bands: £325,000 plus £325,000 transferred = £650,000
- Residence nil rate bands: £175,000 plus £175,000 transferred = £350,000 (the estate is under £2,000,000, so no taper)
- Total allowances: £1,000,000
- Taxable: £1,450,000 minus £1,000,000 = £450,000, taxed at 40% = £180,000
Now change one fact. Suppose Rosalind's estate were £2,300,000 instead. The excess over £2,000,000 is £300,000, so £150,000 of residence allowance is tapered away, leaving £200,000 of the couple's £350,000. Allowances fall to £850,000, so the taxable amount is £2,300,000 minus £850,000 = £1,450,000, and the tax is 40% of that, or £580,000. The extra £850,000 of estate produced £400,000 of tax, an effective rate well above 40% on that slice, entirely because of the taper. Our guide to the married couples' threshold and residence nil rate band goes further into how transferred allowances are claimed.
The reliefs, and the two dates that changed them
Business relief and agricultural relief sit outside the allowance stack: they reduce the value of qualifying assets before the rate is applied. Both were uncapped at 100% for decades. That ended on 6 April 2026. GOV.UK now states that "100% relief is capped at £2.5 million for qualifying business or agricultural property", with 50% relief above it, and the allowance is shared between the two reliefs rather than granted twice. Unused allowance can transfer to a surviving spouse or civil partner, so a couple can reach £5 million. Separately, shares traded on markets that do not meet HMRC's definition of "listed", which includes AIM, now attract 50% relief rather than 100%.
One correction worth carrying: a great deal of published commentary still quotes a £1 million cap. That was the figure in the original October 2024 announcement. It was raised to £2.5 million, with transferability added, before the rules took effect. If you are reading an article that says £1 million, it is out of date. Our guides to business relief and agricultural relief cover the qualifying tests, which are where most claims actually fail.
The second date is 6 April 2027. Under the government's measure on inheritance tax on unused pension funds and death benefits, most unused pension funds and death benefits are brought into the estate from that date, and "Personal Representatives will be liable for reporting and paying any Inheritance Tax due". Death in service benefits from a registered pension scheme and certain dependants' scheme pensions are excluded, and the spouse and charity exemptions continue to apply. For many families this is the largest change to their exposure in a generation, because the pension was the one asset that never counted.
Where to go from here
These figures are stable until at least April 2031, which makes the planning question practical rather than speculative: which allowances does your estate actually qualify for, and what would tip it over the £2 million line. The IHT threshold calculator runs that arithmetic for you, and the inheritance tax pillar guide maps the wider system these numbers sit inside.
Where the answer lands close to a threshold, a taper line or a relief cap, the detail stops being arithmetic and starts being drafting. How a home is left, how allowances are claimed from a first death, whether a business genuinely qualifies: those points move a bill by six figures. We can introduce you to an estate planning solicitor who will work from your actual figures, and anything touching pensions or investments should also go to an FCA authorised adviser.