Quick Answer
Inheritance Tax (IHT) is charged at 40% on the value of your estate above the nil-rate band (£325,000). With a residence nil-rate band of £175,000, a couple can potentially pass on up to £1 million free of IHT — but planning is essential.Key IHT Allowances...
Key Information
- Last Updated:
- 1 Sep 2026
- Category:
- Retirement Advice
- Reading Time:
- 1 min read
Inheritance Tax (IHT) is charged at 40% on the value of your estate above the nil-rate band (£325,000). With a residence nil-rate band of £175,000, a couple can potentially pass on up to £1 million free of IHT — but planning is essential.
Key IHT Allowances
| Allowance | Amount |
|---|---|
| Nil-rate band | £325,000 |
| Residence nil-rate band | £175,000 |
| Spouse/civil partner exemption | Unlimited |
| Annual gift exemption | £3,000/year |
Practical Planning Steps
- Write a will — dying intestate can be very expensive for your family
- Make use of annual gift exemptions
- Consider a trust for assets above the nil-rate band
- Ensure your pension nominations are up to date (pensions are usually outside your estate)
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Did you know that if your estate includes a family business or farm, it may qualify for relief on up to 100% of its value? This could significantly reduce your IHT liability.
I'm a bit confused about how the residence nil-rate band interacts with the standard nil-rate band. Can someone clarify if it's additive (i.e., £325k + £175k = £500k) or does it replace the standard band for properties?
Living in Bath with a larger than average home? Don't forget to factor in the residence nil-rate band. Great reminder to get planning!
I recently moved to Bournemouth with my family and this article has been a godsend for getting our Inheritance Tax planning sorted. It's clear, concise and full of practical tips.
I live in York and IHT's been on my mind lately. This guide has really helped me understand the allowances better. Might even consider setting up a trust, as advised.
Did you know that if your estate is worth more than £2 million, the residence nil-rate band will be tapered away? It's important to consider this when planning.
Just discovered I can gift £3k each year tax-free. What a brilliant way to start helping my grandkids now! Any tips on the best way to set up a trust?
I appreciate this guide's clarity on inheritance tax allowances, but I'm unsure how practical it is for couples to potentially pass on £1m free of IHT. Could you elaborate more on this?
Thanks for this guide! As a retired couple in Devon, we've been worried about IHT. We're definitely going to review our will and consider trusts.
I wonder why the residence nil-rate band is only increasing in £25,000 increments until 2026, rather than annually?
Just moved to Wiltshire and this guide has been invaluable. Who knew IHT could be so complex? Thanks for breaking it down!
I'm over 60 and just found out about the residence nil-rate band. Wish I'd known this sooner! Has anyone else made use of this to reduce their IHT bill?
I've just hit 55 and never thought about inheritance tax until now. How soon should I start thinking about trusts?