Allowances & rates: Inheritance Tax

What are the current rates and allowances for Inheritance Tax (IHT)?

This is a freeview 'At a glance' guide to Inheritance Tax (IHT) rates and allowances.

	From 2008-09	To 2008-09
Nil-rate band^/*	£325,000	312,000
Lifetime rate	20%	20%
Death rate	40%	40%
Death rate where 10% or more left to charity	36% (from 2014-15)
Increased by any unused portion of a predeceased spouse or civil partner's nil rate band. Autumn Budget 2025 proposed that the NRB is frozen until 5 April 2031. *From April 2017, an additional Residence Nil Rate Band (RNRB) is available to cover a home of the deceased. This has been phased in, beginning at £100,000 per individual and increasing by £25,000 each year until it reached £175,000 in 2020-21. Autumn Budget 2025 proposed that the RNRB is frozen until 2031. See Main Residence Nil Rate Band.

Tax is payable within six months of the end of the month of death e.g. a death in December 2023 will mean the IHT must be paid by 30 June 2024.

See: Estate planning checklist

At a glance

Rates & Allowances

It is proposed that the IHT thresholds will remain at their current levels for a further year until 5 April 2031.

Individuals will be entitled to:
- £325,000 Nil Rate Band (NRB).
- £175,000 Residence Nil Rate Band (RNRB).
  - RNRB will continue to be tapered at a rate of £1 for every £2 where the net value of the estate exceeds £2 million.
The nil rate band is transferable between spouses and civil partners. See IHT: Transferable Nil Rate Band

Offshore trusts and settlors

Finance Act 2020 amends the legislation in respect of offshore trusts, property added to trusts by UK-domiciled or deemed domiciled individuals is no longer excluded property for IHT. See Non-domicile status, deemed domicile & tax and Non-resident trusts.

Non-domiciled individuals

A non-UK domiciled individual is currently exempt from IHT on non-UK assets unless a spousal election has been made.

Individuals may be deemed to be UK domiciled for IHT purposes. This may be due to being:
- Domiciled in the UK at any time in the three years immediately preceding the time at which the question of domicile arises.
- UK-born, with a UK domicile of origin and UK resident for at least 15 years in the past 20 years.
The estate of a foreign domiciliary may be excepted, which means that there are no IHT reporting requirements to HMRC. This should be the case provided they died abroad, they have never held a UK domicile and the UK assets in their estate, passing by will or survivorship, are shares or cash with a death value of less than £150,000. A full IHT account is required if:
- The estate contains overseas property which has value attributable to UK residential property.
- Chargeable gifts of over £3,000 were made in the seven years prior to death.
See Non-domicile status, deemed domicile & tax and IHT: Gifts

Note that from 6 April 2025, IHT will move from a domicile-based regime to a residence-based system.

See Non-Doms Remittance changes: briefing

Spouses and civil partners

Lifetime and death transfers between UK-domiciled spouses/civil partners are exempt from IHT. Any proportion of unused nil-rate band of the first spouse to die may be carried forward and added to that of the second spouse. See Transferable Nil rate band.

See IHT: Gifts

Charitable donations

If a donation of at least 10% of the net value of the estate is made to charity the IHT rate applying to that estate decreases to 36%. The charity concerned will receive more if a donor is able to donate under the Gift Aid scheme whilst alive because the charity will be able to receive a basic rate tax credit. See IHT discount on charitable donations.

Business Property Relief (BPR) and Agricultural Property Relief (APR)

BPR

Exemptions
Business property: a business, an interest in a business, unquoted shares (inc. AIM shares) and unquoted securities with control	100%
A controlling interest in a listed company	50%
Assets used by the transferor's controlled company or partnership, assets held in a trust of which the deceased was a beneficiary and used in their business	50%

* Relevant business property must usually have been owned for at least two years prior to transfer/death.

APR (either 100% or 50%)

Given on the agricultural value of agricultural property which has been:

Occupied by the owner for the purposes of agriculture for two years ending with the date of the transfer (death).
Owned by them for seven years ending with that date and occupied throughout by them or another for the purposes of agriculture.

BPR and APR reforms were announced in the Autumn Budget 2024, with further changes being announced in the Autumn Budget 2025.

From 6 April 2026:

A new £2.5 million allowance will apply to the combined value of business and agricultural property assets that qualify for 100% relief under APR or BPR.
- The new allowance is in addition to the existing nil-rate bands and exemptions.
Where the combined value of business and agricultural property assets exceeds the £2.5 million allowance, the rate of relief will be reduced to 50% on the value of any qualifying relievable property over the £2.5 million allowance.
For individuals, the £2.5 million allowance will cover:
- Property in an estate at death.
- Lifetime transfers to individuals in the seven years before death (failed Potentially Exempt Transfers (PETs)).
- Chargeable Lifetime Transfers (CLTs) where there is an immediate lifetime charge (e.g. most transfers into trust).
Any unused allowance will be transferable between spouses and civil partners.

For further details see: the Private Client section for IHT: Business Property Relief and IHT: Agricultural Property Relief.

Exempt gifts

Certain gifts are exempt from IHT including those within the £3,000 annual exemption, small gifts of £250 per person per tax year, gifts of surplus income and certain gifts on marriage.

See IHT: Gifts

Potentially Exempt Transfers (PETs)

Other gifts are taxable if the transferor dies within seven years of making the gift with a reduced charge (taper relief) if they survive at least three years.

See IHT: Gifts