The inheritance tax threshold explained.
How much can you inherit tax free? Understanding the nil-rate band, the residence nil-rate band and how they combine is the first step to protecting your family's inheritance.
How much can you inherit tax free?
Every estate has a tax-free allowance known as the nil-rate band. Below this threshold, no inheritance tax is due. Above it, the balance of the estate is generally taxed at 40%, unless reliefs or exemptions apply.
There is also an additional residence nil-rate band that can apply when a main home is passed to children or other direct descendants, increasing the total amount that can be passed on tax free.
- ✓ The standard nil-rate band for every estate
- ✓ The residence nil-rate band for passing on a home
- ✓ Transferring unused allowances between spouses
- ✓ How larger estates can taper the residence band
Threshold FAQs
The threshold, or nil-rate band, is the value below which an estate pays no inheritance tax. An additional residence allowance can apply when a home passes to direct descendants. Thresholds are set by HMRC and can change, so always confirm the current figures.
Yes. When the first spouse or civil partner dies, any unused nil-rate band can usually be transferred to the survivor, potentially doubling the amount that can be passed on tax free.
It is an extra allowance that applies when a main residence is left to direct descendants such as children or grandchildren. It increases the total tax-free amount, but tapers away for larger estates over £2 million.
Yes. Allowances and rates are set by the government and can change at any Budget. The current bands are frozen until April 2031, but it's always worth confirming the latest position before making decisions.
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