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The £325,000 nil-rate band has been frozen since April 2009 and stays frozen until 5 April 2031 — a 22-year freeze. The £175,000 residence nil-rate band and the £2 million taper threshold are frozen to the same date. Because the thresholds do not move while asset values do, a rising number of estates are brought within inheritance tax without any change to the rate: HMRC estimates the latest one-year extension alone adds 1,400 taxpaying estates in 2028 to 2029 and 2,900 in 2029 to 2030 compared with raising the thresholds by CPI. Inheritance tax receipts were £8.5 billion in 2025 to 2026. A married couple can combine both allowances, up to £1 million.
The inheritance tax nil-rate band has been frozen at £325,000 since 2009 and stays frozen until 5 April 2031. This guide explains how "fiscal drag" is pulling more families into paying inheritance tax and what it means for bereaved families.
For the 2026/27 tax year, the inheritance tax thresholds are:
| Allowance | Amount | Who Qualifies |
|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | Everyone |
| Residence Nil-Rate Band (RNRB) | £175,000 | Passing family home to direct descendants |
| Combined Individual Maximum | £500,000 | Individuals with qualifying property |
| Married Couple Maximum | £1,000,000 | Couples with transferable allowances |
Tax rate: 40% on the value of the estate above the threshold. The rate falls to 36% where at least 10% of the baseline amount — broadly the estate after exemptions, reliefs and the nil-rate band — passes to charity.
"Fiscal drag" occurs when tax thresholds don't increase in line with inflation or asset price growth. As wages rise and property values increase, more people are pulled into paying taxes they wouldn't have paid if thresholds had kept pace.
The nil-rate band was set at £325,000 in April 2009 and has not moved since. Average UK house prices have risen substantially over the same period — the published series is the UK House Price Index, produced by HM Land Registry and the Office for National Statistics. The effect is that a family home that would have been well under the threshold in 2009 may now push an estate into inheritance tax, even where the deceased had only modest other assets.
No official figure is published for what the nil-rate band would be had it been raised in line with inflation since 2009. What HMRC does publish is the effect of the most recent one-year extension of the freeze: compared with raising the thresholds by CPI, it is forecast to add 1,400 taxpaying estates in 2028 to 2029 and 2,900 in 2029 to 2030.
The freeze on thresholds, combined with rising property values and other assets, has led to record inheritance tax collections:
HMRC's annual receipts bulletin records inheritance tax receipts of £8.5 billion in 2025 to 2026, against £3.5 billion in 2006 to 2007.
The estate numbers are smaller than the receipts suggest. HMRC estimates that extending the freeze by a further year brings an additional 1,400 taxpaying estates in 2028 to 2029 and 2,900 in 2029 to 2030, compared with raising the thresholds by CPI — increases of 0.2 and 0.4 percentage points in the proportion of UK deaths on which inheritance tax is paid.
The freeze disproportionately affects families in areas with high property values, particularly London, the South East, and parts of the South West. A family home worth £400,000 combined with modest savings and a pension could easily exceed the threshold.
Married couples and civil partners can transfer unused nil-rate band to the surviving spouse, giving a combined allowance of up to £1 million. Single people, widowed individuals (depending on timing), and those in unmarried relationships only have the individual allowance of up to £500,000.
The residence nil-rate band (£175,000) only applies when the family home passes to direct descendants. If the home passes to siblings, nieces, nephews, or friends, this additional allowance is lost.
The residence nil-rate band (RNRB) provides an additional £175,000 allowance, but only if specific conditions are met:
The RNRB is reduced for estates worth more than £2 million. The reduction is £1 for every £2 of estate value above £2 million. This means:
If you're administering an estate, the frozen thresholds mean you need to be particularly careful about valuations:
With thresholds frozen and more estates close to the boundary, accurate date-of-death valuations are essential. A difference of a few thousand pounds could determine whether inheritance tax is payable.
Ensure you understand whether the estate qualifies for the residence nil-rate band. This could be worth £175,000 (or £350,000 for a surviving spouse's estate).
With more estates near the threshold, make sure you claim all available reliefs:
The freeze itself does not change the reliefs and exemptions that determine what an estate actually pays. Those are:
Lifetime gifts that fall within an exempt category, or that the donor survives by 7 years, are outside the estate. See our gifting strategy guide for 2025/26.
Where someone has income exceeding their normal living expenditure, gifts made out of that surplus as part of a regular pattern are exempt under the normal expenditure out of income exemption. There is no annual limit, but the conditions — a settled pattern, made out of income rather than capital, and leaving enough income to maintain the donor's usual standard of living — all have to be met, and the estate has to be able to evidence them.
Whether the transferable nil-rate band, the residence nil-rate band and the spouse exemption are available at all depends on who inherits what. The residence nil-rate band, for instance, requires a qualifying home to pass to direct descendants. See our guide to transferring the nil-rate band between spouses.
A whole-of-life policy written in trust pays a lump sum on death that sits outside the estate. It does not reduce the tax; it is an arrangement for having funds available to pay it. See our guide to life insurance in trust.
Where at least 10% of the baseline amount passes to charity, the rate on the rest of that component of the estate is 36% rather than 40%. See our guide to the charitable legacy IHT reduction.
For a comprehensive overview of all the planning steps available, see our IHT planning checklist for 2025/26.
The freeze is legislated until 5 April 2031. It has already been extended twice — first to 2028, then to 2030 at the Autumn Budget in October 2024, and then by a further year at the Budget in November 2025. After that, the government could choose to:
Given that inheritance tax now raises over £8 billion annually, any significant increase in thresholds would require the government to find alternative revenue sources. Political and fiscal pressures make major threshold increases unlikely in the near term.
The frozen thresholds raise the tax an estate pays without any change to the rate. For an executor, the practical consequence is that valuations and reliefs matter more, because more estates now sit close to the threshold.