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%. 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 2009. Under the Finance Act 2025, it will stay at that level until April 2031 (gov.uk — Inheritance Tax nil-rate band and residence nil-rate band thresholds). 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, how it can be increased through spousal transfer and the residence nil-rate band, and what it 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.
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 — see 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 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.
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 spouses is exempt from inheritance tax — so the nil-rate band is 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.
In practical terms, this 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).
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 an 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 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 right now — but it was a meaningful distinction in years when the threshold was rising.
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 − £650,000 = £0
- IHT due: £0
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 alongside the probate application. Evidence of the first spouse’s death and estate value will be required. 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 April 2031 under Budget 2025 (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 potentially 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 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.
Conditions for the RNRB
The residence nil-rate band is not automatic. The key conditions are:
- The estate must include a qualifying residential property — the home the deceased lived in at some point. Buy-to-let properties that were never a main residence do not qualify.
- The property (or a share of it) must pass to a direct descendant. It does not apply to gifts to siblings, nieces, nephews, or other relatives.
- If the deceased downsized or sold their home after 8 July 2015, there are provisions to carry forward some RNRB — but the rules are complex and specialist advice may be needed.
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 £2,175,000 loses the full individual RNRB of £175,000 (reduced to zero).
- An estate worth £2,350,000 loses both the individual and transferred RNRB entirely.
The taper threshold is also frozen at £2,000,000 until 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.
For large or complex estates — particularly those above £2 million or involving business assets or agricultural property — the RNRB calculation can be intricate. Professional advice from a solicitor or tax adviser is worth the cost.
How gifts 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 (wedding gifts, small gifts). 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 (or none) of it to shelter the rest of the estate.
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.
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 they 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.
- Check for gifts 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 are not automatic — they need to be properly structured. A will ensures 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 — IHT must be paid, or arrangements made with HMRC, before probate is granted.
Common questions
What is the nil-rate band for 2024/25 and 2025/26?
The nil-rate band is £325,000 for both 2024/25 and 2025/26 — and will remain at that level through to 5 April 2031 under the Finance Act 2025. It has been frozen at £325,000 since 2009. The residence nil-rate band is similarly frozen at £175,000 until the same date (gov.uk — Inheritance Tax nil-rate band and residence nil-rate band thresholds from 6 April 2026).
Can I increase my nil-rate band?
There are two main ways the effective nil-rate band can exceed £325,000:
- Transferable nil-rate band — a surviving spouse or civil partner can claim the unused nil-rate band from their deceased partner, up to a maximum of 100% — giving a combined threshold of up to £650,000.
- Residence nil-rate band — an additional £175,000 (transferable, so up to £350,000 for couples) applies where a qualifying residential property passes to direct descendants.
Beyond these two, some estates may also benefit from other reliefs — business property relief, agricultural property relief, and the charity exemption can reduce or remove IHT on qualifying assets. Our guide to inheritance tax exemptions and reliefs covers all of the main reliefs in detail.
Does the nil-rate band apply to lifetime gifts?
The nil-rate band interacts with lifetime gifts through the seven-year rule. Gifts above the annual exemption (£3,000 per year) that are made within seven years of death are added back into the estate for IHT purposes. They are applied against the nil-rate band first — potentially reducing the amount of nil-rate band available to shelter the rest of the estate. The annual £3,000 exemption, wedding gifts, and small gifts under £250 per recipient are safe and do not affect the nil-rate band. See our full guide to inheritance tax gift rules and the 7-year rule for how the calculations work.
Summary
| Allowance | Amount | Frozen until | Condition |
|---|---|---|---|
| Standard nil-rate band (NRB) | £325,000 | April 2031 | Applies to all individuals |
| Transferable NRB (couple) | Up to £650,000 | April 2031 | Married/civil partner; first death left unused NRB |
| Residence nil-rate band (RNRB) | £175,000 | April 2031 | Home passing to direct descendants; estate under £2m |
| Combined maximum (couple, with home) | £1,000,000 | 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, March 2026. This guide covers England and Wales. 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, or large lifetime gifts — a solicitor or tax adviser can save considerable time and money.