The core numbers
Inheritance Tax Thresholds and Allowances
The headline thresholds are simple. Whether an estate can actually use them is where the detail begins.
General education, not personal financial, legal or tax advice.
Nil-rate band
The £325,000 nil-rate band is available against the estate and is fixed through 5 April 2031. Tax is normally charged at 40% on the taxable value above available exemptions, reliefs and thresholds.
Residence nil-rate band
Up to £175,000 may be available when a qualifying home is left to direct descendants. It is capped by the qualifying home value and reduced for estates above £2 million. It is not a general extra allowance for every estate.
Transfer between spouses and civil partners
Unused percentages of the nil-rate band and residence nil-rate band can be claimed on the later death of a spouse or civil partner. In the straightforward case, this can produce up to £650,000 of nil-rate band and up to £350,000 of residence nil-rate band. It is the unused percentage that transfers, and a claim is required.
Exemptions and reliefs are separate
Spouse or civil-partner exemption, charity exemption, business relief and agricultural relief can change the taxable amount without changing the headline bands. Gifts made during life can use the nil-rate band before the death estate is assessed.
That figure assumes a qualifying married couple or civil partnership, full unused transferable bands, a sufficiently valuable qualifying home left to direct descendants, and no loss of residence band through tapering.
Direct answers
Frequently asked questions
What is the Inheritance Tax nil-rate band?
The standard nil-rate band is £325,000 per person. Any unused percentage can potentially transfer to a surviving spouse or civil partner.
What is the residence nil-rate band?
It is an additional allowance of up to £175,000 per person where a qualifying home passes to direct descendants. It is limited by the home value and tapers for estates over £2 million.
When is Inheritance Tax usually paid?
Inheritance Tax is generally due by the end of the sixth month after the month of death, although instalment options can apply to some assets.