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:
- 31 May 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.