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IHT thresholds frozen until 2030: £325,000 nil-rate band frozen since April 2009 (16 years already), will remain frozen until April 2030 minimum = 21-year freeze. £175,000 residence nil-rate band also frozen until 2030. Fiscal drag impact: If threshold rose with inflation would be ~£490,000 today—freeze pulls more estates into IHT. HMRC collected record £8.2 billion IHT in 2024/25, estimated 10,500 additional estates pay IHT yearly due to frozen thresholds. House price inflation main driver: Average UK house price rose 95% since 2009 while IHT threshold stayed flat. Married couples: Combined £1M allowance (£325K + £175K × 2) but frozen threshold means rising proportion of estates hit IHT despite doubling allowances.
The inheritance tax nil-rate band has been frozen at £325,000 since 2009 and will remain frozen until at least April 2030. This guide explains how "fiscal drag" is pulling more families into paying inheritance tax and what it means for bereaved families.
Average reading time: 8 minutes • Last updated: November 2025
For the 2026/26 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 (36% if leaving 10% or more 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.
When the nil-rate band was set at £325,000 in April 2009:
This means a family home that would have been well under the threshold in 2009 may now push an estate into inheritance tax territory, even if the deceased had only modest other assets.
If the nil-rate band had increased with CPI inflation since 2009, it would be approximately £490,000 today - £165,000 higher than the current frozen threshold. This means thousands of families are paying inheritance tax who would not have done so under an inflation-linked system.
The freeze on thresholds, combined with rising property values and other assets, has led to record inheritance tax collections:
The government estimates that extending the freeze until 2030 will bring an additional 10,500 estates into paying inheritance tax each year compared to if thresholds had risen with inflation.
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:
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There has been speculation that the November 2026 Budget could reduce or remove the residence nil-rate band entirely. This would reduce the maximum threshold from £500,000 to £325,000 per person, significantly increasing the number of estates paying inheritance tax. Nothing is confirmed until the Budget on 26 November.
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 cannot be planned around — but its impact can be reduced through proactive inheritance tax planning. The key tools are:
Lifetime gifts that fall within exempt categories, or that survive the 7-year period, reduce the taxable estate permanently. With thresholds frozen and estates growing, every year of inaction allows more value to accumulate above the nil-rate band. See our gifting strategy guide for 2025/26.
If you have surplus income — income exceeding your normal living expenditure — you can give it away free of IHT under the normal expenditure out of income exemption. There is no annual limit. This is particularly valuable for retirees with pension income exceeding their needs.
Wills should be reviewed regularly to ensure they make full use of available nil-rate band transferability, the RNRB, and — where relevant — spouse exemptions. A will that was appropriate 10 years ago may no longer be optimal as the estate has grown. See our guide to transferring the nil-rate band between spouses.
A whole-of-life policy written in trust provides a lump sum on death to pay the IHT bill, without reducing the estate. This does not reduce the IHT itself but ensures the tax can be paid without forcing asset sales. See our guide to life insurance in trust.
Leaving 10% or more of the net estate to charity reduces the IHT rate from 40% to 36% on the remainder. For larger estates, this can save significant amounts. 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 current freeze is legislated until April 2030. 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 represent a significant "stealth tax" increase for many families. Understanding the current rules and planning accordingly can help minimise the impact on bereaved families.
1 in 3 probate applications are sent back. IHT errors are the most common reason.
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Where they normally lived, even if they died somewhere else.
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