Question 1

What is the UK IHT threshold for 2026/27?

Accepted Answer

The standard nil rate band is £325,000 per person, frozen since 2009 and scheduled to remain frozen until April 2030. The residence nil rate band adds up to £175,000 when a qualifying main residence passes to direct descendants. A married couple can therefore pass up to £1 million tax-free if they use both NRBs, both RNRBs, and the surviving spouse claims the transferred unused allowances.

Question 2

How does the residence nil rate band taper work?

Accepted Answer

The RNRB is reduced by £1 for every £2 the estate exceeds £2 million. An estate of £2.35 million loses the entire RNRB (£350K excess × 0.5 = £175K reduction). The taper applies BEFORE Business Property Relief and Agricultural Property Relief are deducted, so reliefs do not help reduce the taper calculation directly.

Question 3

What changes are happening to IHT in April 2026?

Accepted Answer

The biggest 2026 change is the BPR/APR cap. From April 6, 2026, Business Property Relief and Agricultural Property Relief are capped at a combined £1 million allowance per individual at 100% relief; amounts above are only eligible for 50% relief. AIM-listed shares move to a flat 50% BPR rate. Family business and farm owners face significantly higher IHT exposure from this change.

Question 4

When do pensions become subject to IHT?

Accepted Answer

From April 6, 2027, unspent defined contribution pensions will be brought into IHT under proposals announced in the Autumn Budget 2024. Currently, pensions are outside the estate for IHT, making them powerful estate planning tools. The 2027 change makes pre-death drawdown, lifetime gifts, and trust structures more important. Final HMRC guidance is still being finalized.

Question 5

How does the 7-year gift rule work?

Accepted Answer

Most lifetime gifts (PETs — Potentially Exempt Transfers) become fully exempt from IHT if the donor survives 7 years. If death occurs within 7 years, the gift counts back into the estate but with taper relief on IHT due: full rate years 1-3, 80% year 4, 60% year 5, 40% year 6, 20% year 7. Note that the gift uses up the NRB at the date of gift, which can increase tax on remaining estate.

Question 6

What is the reduced 36% IHT rate?

Accepted Answer

If 10% or more of the net estate (after deducting nil rate bands and other reliefs) is left to a registered charity, the IHT rate on the rest drops from 40% to 36%. The 10% threshold is calculated against the "baseline amount" — broadly the estate after NRB/RNRB but before charitable gifts. For some estates, increasing the charitable bequest to just exceed 10% reduces overall tax owed.

Question 7

How does the spouse exemption work?

Accepted Answer

Transfers between UK-domiciled spouses or civil partners are fully exempt from IHT regardless of value. The unused NRB and RNRB of the first-to-die spouse can transfer to the survivor as a percentage on second death. Non-UK-domiciled spouse transfers are capped at £325,000 unless the spouse elects to be treated as UK-domiciled for IHT (with consequences for foreign assets).

Nil Rate Bands
Standard Nil Rate Band (£325,000 × multiplier)	—
Residence Nil Rate Band (£175,000 × multiplier)	—
RNRB Taper Reduction (£2M trigger)	—
Combined Allowance	—
Taxable Estate
Gross Estate	—
Less: BPR/APR Relief	—
Add: Failed PETs (7-yr)	—
Less: Combined Allowance	—
Taxable Estate	—
Tax Rate Applied	—

UK IHT Residence Nil Rate Band Calculator 2026/27

UK Inheritance Tax 2026/27 — What is the Nil Rate Band?

The £2 Million Taper — How RNRB is Lost

Spousal Transfers and the 7-Year Rule

Pension Changes from April 2027