What is the Inheritance Tax nil-rate band for 2026/27?
£325,000 per person, frozen until April 2031. Estates above this may pay 40% IHT.
What is the residence nil-rate band?
An extra £175,000 when a home passes to direct descendants, taking an individual’s tax-free total to £500,000.
What is the Inheritance Tax rate?
40% on the estate above the available nil-rate bands, reduced to 36% if 10% or more of the net estate goes to charity.
How much can a couple pass on tax-free?
Up to £1 million — two £325,000 nil-rate bands plus two £175,000 residence bands, where a home passes to descendants.
What is the seven-year rule?
Most lifetime gifts leave your estate if you survive seven years. Gifts within seven years count, with taper relief reducing tax between years three and seven.
What is taper relief?
A sliding-scale reduction in IHT on gifts above the nil-rate band made three to seven years before death — it reduces the tax, not the gift value.
What gifts are exempt from IHT?
The £3,000 annual exemption, £250 small gifts per person, wedding gifts within limits, and regular gifts from surplus income.
How has Business Property Relief changed?
From April 2026, 100% APR/BPR is capped at £2.5m combined per person, with 50% relief above (an effective 20% rate). AIM shares get 50%.
Is the APR/BPR allowance transferable?
Yes. Unused allowance transfers to a spouse or civil partner, so a couple can shelter up to £5m of qualifying assets plus their nil-rate bands.
When is Inheritance Tax due?
Generally within six months of the end of the month of death. Interest accrues after that; some assets can be paid in 10 annual instalments.
Which form reports Inheritance Tax?
The IHT400 account with relevant schedules. Lower-value "excepted" estates usually report through the probate process.
Do gifts to my spouse attract IHT?
No. Transfers between UK-domiciled spouses or civil partners are exempt, in life and on death.
Is the residence band ever reduced?
Yes. It tapers by £1 for every £2 an estate exceeds £2 million, disappearing for very large estates.
How does the charity rate reduction work?
Leaving at least 10% of your net estate to charity reduces the IHT rate on the remainder from 40% to 36%.
Are pensions subject to IHT?
Currently usually not, but from April 2027 most unused pension pots will be included in the estate for IHT.
What is a potentially exempt transfer?
A lifetime gift that becomes fully exempt if you survive seven years. If you die sooner, it’s brought back into the IHT calculation.
Can I use trusts to reduce IHT?
Trusts can help manage and sometimes reduce IHT, but they have their own charges and rules. Take specialist advice before setting one up.
What happens to jointly owned property?
Your share is part of your estate. The treatment depends on whether it’s held as joint tenants or tenants in common — reported on IHT404/IHT405.
Do I pay IHT on overseas assets?
UK-domiciled (and now long-term resident) individuals are liable on worldwide assets. Non-domiciled long-term residents may also be exposed.
How do I value an estate?
Total all assets (property, savings, investments, possessions) at market value at the date of death, less debts and liabilities, then apply the nil-rate bands.
Can IHT be paid in instalments?
Yes, on property and certain business assets — up to 10 annual instalments, now extended to all APR/BPR-eligible assets.
What is the annual gift exemption?
£3,000 a year, which you can give away free of IHT. One unused prior year can be carried forward for a £6,000 total.
Are AIM shares still IHT-free?
From April 2026, qualifying AIM shares receive 50% relief rather than the previous 100%, increasing potential IHT exposure.
Who pays the IHT bill?
Usually the executors or personal representatives from the estate before distribution. From April 2027, pension administrators pay any pension-related IHT directly.
Should I make gifts now given the changes?
For some, earlier gifting still helps, though the higher £2.5m APR/BPR cap and transferability reduce urgency for many. Personalised advice is wise.
Where can I find official IHT guidance?
See gov.uk/inheritance-tax and the IHT forms collection on GOV.UK.
