Tax & estate planning guide
What is Inheritance Tax?
Inheritance Tax — IHT — is a tax on the estate of someone who has died. The estate can include property, money, investments and possessions, after taking account of debts and relevant exemptions or reliefs.
Nil-rate band
The standard Inheritance Tax threshold is £325,000.
For 2026/27, the nil-rate band remains £325,000. Subject to the rules, this is the part of an estate that can generally pass before standard-rate IHT becomes payable.
The nil-rate band is currently fixed at £325,000 through to 5 April 2031.
Property, savings, investments and other assets can all form part of the estate calculation.
Residence nil-rate band
An additional £175,000 may be available when a qualifying home passes to direct descendants.
The residence nil-rate band — RNRB — is £175,000 for 2026/27. It can apply where a qualifying residence passes on death to direct descendants such as children or grandchildren.
The RNRB begins to taper away where the net estate is above £2 million, reducing by £1 for every £2 above that threshold.
This is the £325,000 standard nil-rate band plus up to £175,000 of residence nil-rate band, where all conditions are met.
Married couples & civil partners
Transfers between spouses or civil partners are normally exempt.
Assets passing to a qualifying spouse or civil partner are generally exempt from Inheritance Tax. In addition, unused nil-rate band from the first spouse or civil partner to die can usually be transferred to the survivor's estate.
Where both the standard nil-rate band and residence nil-rate band are fully available, a qualifying surviving spouse or civil partner's estate can potentially have up to £1 million of combined allowances.
Residence nil-rate band conditions, estate size, earlier gifts and use of allowances on the first death can all affect the final position.
Rate of tax
The standard estate rate is 40%.
IHT is normally charged at 40% on the taxable part of the estate above the available thresholds.
A reduced rate of 36% can apply to qualifying parts of an estate where at least 10% of the relevant net estate is left to charity, subject to the detailed rules.
The estate normally settles the tax through the executors or personal representatives before assets are distributed, although special rules can apply in some circumstances.
Lifetime gifts
Giving assets away can affect the eventual IHT calculation.
Some lifetime gifts are exempt immediately. Others can remain relevant for up to seven years after they are made.
Annual exemption
You can generally give away up to £3,000 each tax year using the annual exemption, subject to the rules.
Seven-year rule
Many outright gifts fall outside the estate for IHT if you survive seven years after making them.
Taper relief
Where relevant, taper relief can reduce tax on certain gifts made more than three but less than seven years before death.
Gifts with reservation
Giving something away while continuing to benefit from it can prevent the gift from being effective for IHT purposes.
Trusts and lifetime gifts have detailed legal and tax rules, so larger gifts should not be made purely on the basis of the seven-year rule.
Estate planning
IHT planning is about more than reducing tax.
A good estate plan considers who should receive assets, when they should receive them, how much you need to retain for your own lifetime and how wills, gifts, trusts, pensions and life insurance fit together.
Tax efficiency should not come at the expense of your own financial security or access to capital.
Legal advice may be required for wills and trusts, and specialist tax advice can be appropriate where estates, businesses, farms or lifetime gifts are complex.
Estate planning
Could Inheritance Tax affect your estate?
We can help you understand the value of your estate, the allowances that may apply and how financial planning can fit alongside legal and specialist tax advice.
Book a conversationThis guide is for general information only and is not personal tax, legal or financial advice. Inheritance Tax treatment depends on individual circumstances and rules can change. Wills and trusts may require legal advice, and complex tax planning may require specialist tax advice. 2026/27 figures checked against current HMRC/GOV.UK guidance on 16 September 2026.