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Inheritance tax in United Kingdom 2026
Estates pay 40% above the £325,000 nil-rate band, plus an extra £175,000 band when a home passes to children or grandchildren — a couple can shelter up to £1 million between them.
Lifetime gifts escape entirely if you survive them by 7 years, and everything passing to a spouse or civil partner is exempt without limit.
At a glance
- top rate
- 40% (36% where 10%+ of the estate goes to charity)
- entry band
- £325,000 nil-rate band + £175,000 residence band
- tax year basis
- Charged on death; certain lifetime gifts
- filing deadline
- Usually within 6 months of death (executors)
- residency basis
- Worldwide estate after 10 of the last 20 years UK-resident; otherwise UK assets only
- regime flag
- Spouses and civil partners: unlimited exemption
Rates
Inheritance tax 2026/27
| Rate | Base | Applies to |
|---|---|---|
| 0% | First £325,000 (+£175,000 residence band) | Every estate; unused bands transfer to a surviving spouse |
| 40% | Value above the nil-rate bands | Estates on death; gifts within 7 years of death (tapered after year 3) |
| 36% | Value above the bands | Estates leaving at least 10% to charity |
| 20% | Above a combined £1m relief cap | Agricultural and business property from April 2026 (100% relief below the cap) |
Thresholds & allowances
- Annual gifts£3,000 a year (+£250 small gifts per person)
Immediately outside the estate; unused amount carries 1 year
- Gifts out of incomeUnlimited
Regular gifts from surplus income are exempt
- 7-year ruleGifts fall out entirely after 7 years
Tax tapers from year 3 if you don't make it
Residency
Residency trigger
Since April 2025 the net is residence-based: once you've been UK-resident for 10 of the previous 20 years, your worldwide estate is in scope (with a tail after leaving).
Non-resident treatment
Otherwise only UK assets are taxed — and UK residential property counts even when held through offshore companies or trusts.
Notes
- The residence band tapers away for estates above £2 million.
- From April 2027, unused pension pots are set to join the taxable estate — a major planning change now legislated.
- The combined cap on full agricultural and business relief is £2.5 million from April 2026 — raised from the originally announced £1 million in December 2025 — transferable between spouses, with 50% relief (an effective 20% rate) above it.
- Nil-rate bands are frozen until April 2031.
FAQ
How much can you inherit tax-free in the UK?
£325,000 per estate, plus £175,000 where a home passes to direct descendants — and both bands transfer between spouses, so a couple can pass on up to £1 million at 0%.
How does the 7-year gift rule work?
Gifts to individuals are tax-free if you survive 7 years; die sooner and they re-enter the estate, with the tax tapering down from year 3.
Does UK inheritance tax reach foreign assets?
Yes, once you've been UK-resident for 10 of the last 20 years — the old domicile test was replaced by this residence test in April 2025.
Figures: tax year 2026/27, compiled from public sources. Not tax advice.