The Nil Rate Band (NRB) is the portion of a deceased person's estate that is charged to inheritance tax at a rate of nil — in other words, it is IHT-free. In 2025/26 the NRB is £325,000 per person.
Only the value of the estate above the NRB is subject to IHT at the standard rate of 40%. So, for a sole estate worth £600,000 with no RNRB or other reliefs, IHT would be: (£600,000 − £325,000) × 40% = £110,000.
The NRB was last increased to £325,000 in April 2009 and has been frozen since then. The Government confirmed in the Autumn Budget 2024 that the freeze will continue until at least April 2028. With rising property values, more estates are being pulled into the IHT net even though the rate has not changed.
Since October 2007, any NRB unused on the first death can be transferred to the surviving spouse's or civil partner's estate. This is known as the transferable Nil Rate Band (TNRB).
The transfer is expressed as a percentage of the NRB at the time it was unused — not as a cash amount. This means the transferred allowance is calculated using the current NRB value when the second spouse dies, not the NRB at the time of the first death.
The executor claims the transferred NRB by submitting form IHT402 with the probate application for the second spouse's estate. There is no time limit for claiming the transferred NRB, but you must provide evidence of the first spouse's death, their estate, and their unused NRB.
The Residence Nil Rate Band (RNRB) was introduced in April 2017 and provides an additional IHT-free allowance of £175,000 per person in 2025/26, but only when all of the following apply:
The RNRB is claimed on form IHT435 and is also transferable between spouses and civil partners on the same basis as the NRB.
For RNRB purposes, direct descendants include:
Siblings, nephews, nieces, friends, and charities do not qualify. Property left to a discretionary trust also does not qualify (unless specifically set up for direct descendants under certain conditions).
For estates with a net value over £2,000,000, the RNRB is reduced by £1 for every £2 of estate value above this threshold. This means:
| Net Estate Value | RNRB Available |
|---|---|
| Up to £2,000,000 | £175,000 (full) |
| £2,100,000 | £125,000 |
| £2,200,000 | £75,000 |
| £2,350,000 and above | £0 (fully tapered away) |
If the deceased downsized or sold their home after 8 July 2015 and the current estate no longer includes a qualifying property of equivalent value, a "downsizing addition" allows a portion of the RNRB to still be claimed, provided assets of equivalent value are inherited by direct descendants. This prevents people from being penalised for moving to smaller accommodation in later life.
Business Property Relief provides significant IHT relief on qualifying business assets, independent of the NRB and RNRB:
| Asset Type | BPR Rate |
|---|---|
| Business or interest in a business (sole trader, partnership share) | 100% |
| Unquoted shares (including AIM-listed shares) | 100% |
| Quoted shares giving control of company (>50%) | 50% |
| Land, buildings, or machinery owned personally, used in a partnership | 50% |
| Land, buildings, or machinery used in a company you control | 50% |
BPR conditions: the asset must have been owned for at least two years before death. BPR is not available on assets held mainly as investments (e.g., a property investment company). HMRC scrutinises BPR claims carefully.
Similar to BPR, Agricultural Property Relief reduces the agricultural value of qualifying farmland and farming property by 50% or 100% for IHT. APR applies to agricultural land, farm buildings, farmhouses, and cottages. The property must have been owned for at least two years (owner-occupied) or seven years (let to a tenant). The relief applies to the agricultural value only — any extra development value above agricultural value does not qualify.
Certain transfers are completely exempt from IHT regardless of value:
Gifts to individuals (known as Potentially Exempt Transfers, or PETs) become fully exempt from IHT if the donor survives seven years after making them. If the donor dies within seven years, taper relief reduces the IHT due on a sliding scale. See our dedicated Seven Year Rule guide for the full taper table and worked examples.
The Nil Rate Band (NRB) is £325,000 for 2025/26. Only the portion of the estate above £325,000 is subject to IHT at 40%. The NRB has been frozen at £325,000 since April 2009 and is currently set to remain frozen until at least April 2028.
When a spouse or civil partner dies without using all of their NRB, the unused percentage transfers to the surviving spouse's estate. If the first spouse left their entire estate to the surviving spouse (exempt from IHT), 100% of their NRB is unused and transfers — giving the survivor up to £650,000 NRB in total. The executor claims this on form IHT402 when the second spouse dies.
The RNRB is an additional IHT-free allowance of £175,000 (2025/26) that applies when a residential property that was the deceased's main home is left to direct descendants — children, stepchildren, grandchildren, etc. It cannot be used for property left to siblings, friends, or non-descendants. The RNRB is also transferable between spouses on the same basis as the NRB.
Yes, in the right circumstances. A married couple can potentially combine: both NRBs (2 x £325,000 = £650,000) and both RNRBs (2 x £175,000 = £350,000) for a total of £1,000,000. This requires the second estate to include a qualifying residential property left to direct descendants, and assumes neither spouse used their NRB or RNRB in their own estate.
The RNRB tapers away for estates over £2,000,000. The RNRB is reduced by £1 for every £2 by which the estate exceeds £2 million. An estate of £2,350,000 or more loses the RNRB entirely. This taper applies to each individual estate. Lifetime gifts can reduce estate values below £2m to preserve the RNRB.
Business Property Relief (BPR) reduces the value of qualifying business assets for IHT purposes. 100% BPR applies to businesses, interest in a business, and unquoted shares (including AIM-listed shares). 50% BPR applies to shares in a quoted company where the deceased held control, and to land or buildings used in a business. The business must have been owned for at least two years before death.
Yes. Transfers between spouses or civil partners who are both UK domiciled are fully exempt from inheritance tax with no limit. This is known as the spouse exemption. If the recipient spouse is non-UK domiciled, the exemption is limited to £325,000. Transfers to a spouse do not count as potentially exempt transfers and do not use any of the NRB.