Current UK Inheritance Tax Thresholds
Essential information about nil rate bands, residence allowances, and how they work together
Key Takeaways
- • Standard nil rate band: £325,000 per person
- • Residence nil rate band: £175,000 (when leaving home to children)
- • Married couples can combine allowances up to £1 million
- • Thresholds are frozen until April 2030. The standard nil rate band remains £325,000 and the residence nil rate band remains £175,000 through the 2028–29 and 2029–30 tax years.
Understanding the Nil Rate Band
The nil rate band is the amount you can leave in your will without paying inheritance tax. Currently set at £325,000 per person, this threshold has remained unchanged since April 2009. Thresholds are frozen until April 2030. The standard nil rate band remains £325,000 and the residence nil rate band remains £175,000 through the 2028–29 and 2029–30 tax years.
The basic inheritance tax-free allowance available to everyone. Anything above this amount is taxed at 40% (or 36% if 10% or more goes to charity).
Additional allowance when you leave your main residence to direct descendants (children, grandchildren, etc.). Available since April 2017.
Residence Nil Rate Band Explained
The residence nil rate band (RNRB) was introduced to help families keep the family home. However, it comes with specific conditions:
- • You must leave your main residence to direct descendants
- • Direct descendants include children, grandchildren, step-children, and adopted children
- • The property must have been your main residence at some point
- • If you downsize or sell your home, you may still qualify under special rules
- • The RNRB is reduced by £1 for every £2 of estate value over £2 million
- • Your children (including biological, adopted, and step-children)
- • Grandchildren and their lineal descendants
- • Children for whom you are a foster parent
- • Children under a special guardianship order
- • Excluded: siblings, nieces/nephews, cousins (they are not "direct descendants")
Tip: The RNRB applies when a qualifying home (or downsizing equivalent—see below) passes to direct descendants.
Downsizing addition (keep RNRB after selling or downsizing your home)
You can still benefit from the RNRB if you sold, gifted, or downsized your former home on or after 8 July 2015, and leave assets of equivalent value to your direct descendants. The estate may claim a downsizing addition so you don't lose the allowance simply because you no longer own the same property at death.
In 2018, Pat sold their £300,000 home and moved into rented accommodation.
In 2025, Pat dies with £300,000 in investments left to children.
Provided other conditions are met, the estate can claim a downsizing addition, preserving up to the £175,000 RNRB (subject to tapering).
The residence nil rate band is only set against the chargeable estate at death. It does not apply to lifetime gifts (including potentially exempt transfers made within seven years). PETs and chargeable lifetime transfers are assessed under separate rules and do not attract RNRB.
Transferring Allowances Between Spouses
Married couples and civil partners can transfer unused nil rate band allowances to each other. This means a surviving spouse could potentially have:
Reaching the £1 million tax-free figure (couples)
Married couples and civil partners can potentially pass up to £1,000,000 free of Inheritance Tax by combining two NRBs (£325,000 + £325,000) and two RNRBs (£175,000 + £175,000). This outcome depends on meeting the RNRB conditions and avoiding (or minimising) tapering.
- • You are married or in a civil partnership and the first death left unused NRB/RNRB that can transfer
- • A qualifying home (or downsizing equivalent) passes to direct descendants
- • The estate value is at or below £2,000,000 at death; above this, RNRB is tapered (see below)
- • Any previous gifts or trusts are considered in the usual way for the estate calculation
Estate £950,000 consisting of home + other assets, left to children; both partners' unused NRB and RNRB are available; estate ≤ £2m → £1,000,000 potential allowances.
Estate £2.30m; RNRB is reduced by taper (see next section), so the combined figure may be less than £1,000,000.
Tapering for large estates
If the net estate exceeds £2,000,000, the available RNRB is reduced by £1 for every £2 over that threshold. At around £2.35 million, the RNRB is fully tapered to £0 (per person).
If an estate is £2,200,000, the excess is £200,000. Taper = £200,000 ÷ 2 = £100,000 reduction. Starting from £175,000, the available RNRB becomes £75,000.
Historical Context and Future Changes
The nil rate band has been frozen at £325,000 since April 2009, representing a significant real-terms reduction due to inflation. The government has committed to keeping both thresholds frozen until April 2030.
This freeze means more estates will become liable for inheritance tax over time, as property values and other assets continue to grow while the tax-free thresholds remain static.