The nil-rate band is the amount of an estate that is free from inheritance tax. It currently stands at £325,000. Everything above that threshold is taxed at 40%, unless another allowance or relief applies. If you are dealing with an estate right now, that is the number you need to know.
The nil-rate band has been frozen at £325,000 since 6 April 2009. At the Autumn Budget 2025 the freeze was extended again, so it will stay at that level until at least 5 April 2031 (gov.uk – Inheritance Tax thresholds and interest rates). The standard IHT rate is 40% on anything above the threshold, reduced to 36% if 10% or more of the net estate is left to charity (gov.uk – Inheritance Tax overview).
This guide explains the nil-rate band in full: where it comes from in law, how it can be increased through spousal transfer and the residence nil-rate band, how lifetime gifts and trusts can reduce it, which HMRC forms claim it, and what it all means in practice for the estate you are administering.
What is the nil-rate band?
The nil-rate band (NRB) is the tax-free allowance applied to a person’s estate on death. When HMRC assesses the estate, the first £325,000 of its value attracts no inheritance tax. The rate of 40% applies only to the portion above that threshold, after any other allowances and reliefs.
In law, inheritance tax is charged on the value transferred on death under the Inheritance Tax Act 1984, and the nil-rate band is the band of that value charged at nil per cent (section 7 IHTA 1984). The £325,000 figure sits in the table of rates that the Act and successive Finance Acts set.
The nil-rate band is available to all individuals regardless of how they are related to their beneficiaries, and it can be applied to any type of asset: property, savings, investments, or personal possessions.
Here is how the maths works for different estate sizes:
| Estate value | Nil-rate band | Taxable amount | IHT at 40% |
|---|---|---|---|
| £200,000 | £325,000 | £0 | £0 |
| £325,000 | £325,000 | £0 | £0 |
| £400,000 | £325,000 | £75,000 | £30,000 |
| £600,000 | £325,000 | £275,000 | £110,000 |
| £1,000,000 | £325,000 | £675,000 | £270,000 |
These calculations assume no transferable nil-rate band and no residence nil-rate band. Both of those can substantially increase the tax-free amount, as explained below.
One important clarification: the value of the estate for IHT purposes includes the deceased’s share of jointly owned property, all bank and investment accounts, personal possessions, and any chargeable gifts made within seven years of death. It is the net value, after outstanding debts and liabilities, that is measured against the threshold. Full guidance on how to value the estate is on gov.uk – Valuing the estate of someone who died.
A common misconception about the £325,000
It is tempting to think the first £325,000 of every estate is always tax-free. In practice the nil-rate band can be reduced before it is set against the estate. Chargeable gifts in the seven years before death are deducted from it first. Gifts into trusts in the same period use it up too. By contrast, a surviving spouse may have a much larger band because they inherited their late partner’s unused allowance. The £325,000 is a starting point that is adjusted for each person’s circumstances, so the amount available to shelter the estate on death can be more or less than that headline figure.
The history of the nil-rate band and the freeze
The nil-rate band rose steadily through the 1990s and 2000s, broadly tracking house prices and inflation. It reached £325,000 on 6 April 2009, and there it has stayed. The freeze, first introduced as a temporary measure, has been extended several times. The most recent extension at the Autumn Budget 2025 means the £325,000 figure now holds until at least 5 April 2031 (gov.uk – Inheritance Tax thresholds and interest rates).
A long freeze has a quiet effect known as fiscal drag. As asset values and house prices rise while the threshold stays flat, more estates are pulled over the line and into paying inheritance tax, even though the rate itself has not changed. This is why a growing number of ordinary estates, particularly those including a home in a higher-value area, now face an IHT bill where a generation ago they would not have.
The percentage basis of the transferable nil-rate band (covered below) means the freeze also affects how transferred allowances are valued. Because the figure has not moved since 2009, the percentage and cash calculations currently give the same answer, but that distinction mattered in the years when the threshold was rising and could matter again if it rises after 2031.
The transferable nil-rate band
When a married person or civil partner dies and leaves their estate to their spouse or civil partner, the transfer between them is exempt from inheritance tax, so the nil-rate band is left unused. That unused allowance does not simply disappear. It can be transferred to the surviving spouse and added to their own nil-rate band when they die.
The transferable nil-rate band was introduced by the Finance Act 2008 and is set out in sections 8A to 8C of the Inheritance Tax Act 1984. In practical terms, it means a couple can pass up to £650,000 to their beneficiaries free of inheritance tax, provided the conditions are met (gov.uk – Transfer threshold for Inheritance Tax; HMRC – IHTM43001).
How the transfer works
The nil-rate band transfer is calculated as a percentage, not a fixed sum. If the first spouse to die left an estate of £150,000 against a nil-rate band of £325,000, then 100% of the nil-rate band was unused, and 100% can be transferred to the survivor’s estate. If they left a chargeable estate of £162,500, then 50% of the nil-rate band was used and 50% can be transferred.
This matters because the percentage is applied to the nil-rate band in force at the time of the second death, not the first. Since the nil-rate band has been frozen since 2009, this makes little practical difference at present, but it was a meaningful distinction in years when the threshold was rising.
The first death can have occurred at any time, even decades ago and even under the earlier Capital Transfer Tax or Estate Duty regimes, as long as the couple were married or in a civil partnership. For civil partners, the first death must have been on or after 5 December 2005, when the Civil Partnership Act came into force.
Example: both nil-rate bands in full
- Husband dies first, leaving his entire estate to his wife. No IHT is due. His nil-rate band (100%) is unused and transferable.
- Wife dies later with an estate of £600,000.
- Her own nil-rate band: £325,000
- Transferred nil-rate band from husband (100% of £325,000): £325,000
- Combined tax-free threshold: £650,000
- Taxable amount: £600,000 minus £650,000 = £0
- IHT due: £0
Where there has been more than one marriage
A surviving spouse can inherit unused nil-rate band from more than one late spouse or civil partner, but there is a cap. The total uplift can never be more than 100%, so the most any individual’s nil-rate band can reach by transfer is two full bands, currently £650,000, no matter how many times they have been widowed. Each earlier death is assessed for its unused percentage and the total is then capped at 100%.
How to claim it
The transferable nil-rate band does not apply automatically. The executor of the surviving spouse’s estate must claim it by completing form IHT402 and submitting it to HMRC, usually alongside the IHT400 account. You will need the first spouse’s death certificate, the marriage or civil partnership certificate, a copy of any will, and details of what was left and to whom. The claim must normally be made within two years of the end of the month in which the second spouse died (gov.uk – IHT402).
For some straightforward estates where the only claim is to transfer the whole unused nil-rate band, the shorter form IHT217 can be used. This is one of the reasons making a will, and keeping estate records, matters so much. Without documentation of the first death, claiming the transfer can be difficult.
If you are dealing with the estate administration process, our guide on how to apply for probate covers the IHT return process in full.
The residence nil-rate band
The residence nil-rate band (RNRB) is an additional tax-free allowance introduced in 2017. It applies when someone leaves their home, or a share of their home, to a direct descendant: a child, stepchild, adopted child, foster child, grandchild, or their spouse or civil partner.
The RNRB currently stands at £175,000 per person, and like the standard nil-rate band, it is frozen until at least 5 April 2031 (gov.uk – Work out and apply the residence nil rate band for Inheritance Tax). Our full guide to the residence nil-rate band covers eligibility, the tapering threshold, the downsizing addition, and how to claim it.
The RNRB can be transferred between spouses and civil partners in the same way as the standard nil-rate band. This means a couple leaving their home to their children could have a combined RNRB of £350,000, and combined with the transferable standard nil-rate band, a total tax-free threshold of £1,000,000.
How the standard NRB and RNRB stack
The two allowances are separate and apply in a set order. The residence nil-rate band is applied first, against the value of the qualifying home passing to descendants, then the standard nil-rate band applies to the rest of the estate. They have different rules: the standard band covers any asset and any beneficiary, while the RNRB only covers a home left to direct descendants and is tapered away for larger estates. An estate can qualify for one without the other. A childless person leaving everything to a sibling gets the £325,000 standard band but no RNRB. A person of modest means leaving a flat to their children may use only part of their standard band and the full RNRB.
How the figures add up for a couple
| Allowance | Per person | Combined (couple) |
|---|---|---|
| Standard nil-rate band | £325,000 | £650,000 |
| Residence nil-rate band | £175,000 | £350,000 |
| Combined maximum | £500,000 | £1,000,000 |
Reaching the £1 million combined threshold requires: the couple were married or in a civil partnership; the first spouse left their estate to the survivor (preserving both nil-rate bands); the surviving spouse’s estate includes a qualifying residential property; and the property passes to direct descendants. The £1 million is a maximum, not a standard allowance every couple receives.
The taper for larger estates
The RNRB is reduced for estates above a certain size. For every £2 by which the estate exceeds £2,000,000, the RNRB is reduced by £1. This means:
- An estate worth £2,000,000 receives the full RNRB.
- An estate worth £2,350,000 loses the full individual RNRB of £175,000 (reduced to zero).
- An estate worth £2,700,000 loses both the individual and a transferred RNRB entirely.
The taper threshold is also frozen at £2,000,000 until at least 5 April 2031. The estate value used for the taper is calculated before deducting the nil-rate band, so it is the gross estate value that matters here. The standard nil-rate band is not tapered, so even a very large estate keeps its £325,000 (and any transferred band); only the residence allowance is withdrawn.
Downsizing: keeping the RNRB after selling or moving home
A natural worry is that selling the family home, or moving to a smaller property or into care, would lose the residence nil-rate band. The downsizing addition exists to prevent that. Where someone disposed of a more valuable home, or stopped owning a home, on or after 8 July 2015 and then died owning a lower-value home (or none at all), the estate can still claim an addition equal to the RNRB that was effectively lost on the move (HMRC – IHTM46050 onwards). These rules are in sections 8FA to 8FE of the Inheritance Tax Act 1984.
The conditions are specific. The disposal must have been on or after 8 July 2015, the death must be on or after 6 April 2017, and assets at least equal to the lost RNRB must pass to direct descendants (they do not have to be the home itself, but something of equivalent value must be closely inherited). The calculation compares the RNRB available at death with what would have been available had the move not happened, and adds back the shortfall. It is one of the more intricate parts of IHT, so an estate involving a sale, a move into care, or a series of moves often benefits from professional advice.
For large or complex estates, particularly those above £2 million or involving business assets or agricultural property, the RNRB calculation can be involved. Professional advice from a solicitor or tax adviser is worth the cost.
How lifetime gifts and trusts affect the nil-rate band
Gifts made during a person’s lifetime can reduce the nil-rate band available on their death. Under the seven-year rule, any gifts made in the seven years before death that exceed the annual gift exemptions are counted as part of the estate for IHT purposes, using up nil-rate band in the order the gifts were made.
The annual exemption of £3,000 per tax year is safe, as are gifts covered by other exemptions such as wedding gifts and small gifts of up to £250 per person. But larger lifetime gifts, for example a cash transfer to children, can eat into the nil-rate band if made within seven years of death, potentially leaving less of it (or none) to shelter the rest of the estate.
Gifts into trusts and the lifetime nil-rate band
Gifts into most trusts work differently from gifts to individuals. A gift into a discretionary trust is a chargeable lifetime transfer, assessed for inheritance tax straight away rather than only if the donor dies within seven years. The available nil-rate band at the time of the gift is the standard £325,000 reduced by any chargeable transfers made in the previous seven years. If the new gift, added to that running total, stays within the nil-rate band, no tax is due immediately. If it exceeds the band, the excess is taxed at the lifetime rate of 20%, which is half the death rate (HMRC – IHTM14501 onwards).
This matters for the estate on death in two ways. First, a chargeable transfer made within seven years of death reduces the nil-rate band available to the estate itself. Second, if the donor dies within seven years of the gift into trust, the transfer is recalculated at the full death rate, with credit for any lifetime tax already paid. Trusts are a specialist area where professional advice is important, both when they are set up and when an estate that made gifts into trust is being administered.
The detail of how taper relief applies to gifts, and how to calculate the IHT position, is covered in our guide to inheritance tax gift rules and the 7-year rule. If you are dealing with an estate where significant gifts were made in the years before death, it is worth taking professional advice early. The calculations affect what IHT is due and who pays it.
The nil-rate band across the UK
Inheritance tax is a UK-wide tax, so the £325,000 nil-rate band, the £175,000 residence nil-rate band, the transfer rules, and the 40% rate all apply in exactly the same way in England, Wales, Scotland, and Northern Ireland. There is no Scottish or Northern Irish version of inheritance tax.
What differs is the estate administration process built around it. In England, Wales, and Northern Ireland the grant that lets an executor deal with the estate is called probate (or, where there is no will, letters of administration). In Scotland the equivalent is confirmation, applied for through the sheriff court. The terminology and some of the supporting paperwork differ, but the inheritance tax calculation, the forms used to report it to HMRC, and the nil-rate band itself are identical throughout the UK.
Which HMRC forms deal with the nil-rate band
Several forms come into play depending on the estate and which allowances are claimed:
| Form | What it does |
|---|---|
| IHT400 | The full inheritance tax account, used where tax is due or HMRC needs a detailed return. |
| IHT402 | Claims the transferable nil-rate band from a deceased spouse or civil partner. |
| IHT435 | Claims the residence nil-rate band. |
| IHT436 | Claims a transferred (unused) residence nil-rate band from a late spouse or civil partner. |
| IHT217 | A shorter route to transfer the whole unused nil-rate band in some simpler estates. |
You can use HMRC’s online checker to confirm which forms an estate needs and whether a full IHT400 account is required (gov.uk – Inheritance Tax forms). Reporting rules for excepted estates changed for deaths from 1 January 2022, so many estates where no tax is due no longer need a full account at all.
What this means for estate planning
If you are dealing with a bereavement right now, the most important steps are:
- Establish whether a transferable nil-rate band can be claimed. Check whether the deceased was previously married or in a civil partnership, what their late partner left, and whether their nil-rate band was wholly or partially unused. Evidence of the first death and the estate value at that time will be needed.
- Check whether the RNRB applies. If the estate includes a property and there are direct descendants, the RNRB may reduce or eliminate the IHT liability. If the deceased had downsized or sold their home since July 2015, the downsizing addition may still apply.
- Check for gifts and trusts in the last seven years. These may reduce the available nil-rate band and affect who owes what.
For anyone making a will or reviewing their affairs, the key point is that the transferable nil-rate band and RNRB have conditions and need to be properly structured. A will helps ensure that the first spouse’s nil-rate band is preserved rather than inadvertently used. For estates likely to exceed £500,000 (or £1 million for couples), professional advice on structuring the estate is worth considering.
For estates where IHT is due, our guide to how to pay inheritance tax covers deadlines, payment methods, and instalment options. Understanding how probate works is also an essential next step, as IHT must be paid, or arrangements made with HMRC, before probate is granted.
Summary
| Allowance | Amount | Frozen until | Condition |
|---|---|---|---|
| Standard nil-rate band (NRB) | £325,000 | 5 April 2031 | Applies to all individuals |
| Transferable NRB (couple) | Up to £650,000 | 5 April 2031 | Married/civil partner; first death left unused NRB |
| Residence nil-rate band (RNRB) | £175,000 | 5 April 2031 | Home passing to direct descendants; estate under £2m |
| Combined maximum (couple, with home) | £1,000,000 | 5 April 2031 | Both NRBs and both RNRBs fully available |
The nil-rate band is the central mechanism of inheritance tax. Most estates below £325,000 pay nothing; for estates that do, the transferable nil-rate band and residence nil-rate band can dramatically reduce, or eliminate, the liability. If you are dealing with an estate and believe one or both of these additional allowances might apply, establishing the facts early makes the probate process considerably smoother.
For help with the wider estate administration process, see our guides on how long probate takes, how to apply for probate, and what happens when someone dies without a will.
All figures verified against HMRC and gov.uk guidance, June 2026. This guide covers the United Kingdom; estate administration terminology differs in Scotland (confirmation) and Northern Ireland. It is for information only and does not constitute legal or tax advice. For complex estates, particularly those above £1 million, or involving business assets, overseas property, trusts, or large lifetime gifts, a solicitor or tax adviser can save considerable time and money.