Inheritance Tax Threshold: NRB, RNRB & the £2m Taper

The UK inheritance tax threshold is not one number. It combines a £325,000 nil-rate band with an optional £175,000 residence band, both transferable between spouses, and both tapered away once an estate passes £2 million.

What the Inheritance Tax Threshold Actually Is

"The inheritance tax threshold" usually means the total value an estate can pass on before 40% inheritance tax applies, and it is built from two separate allowances: the nil-rate band that everyone gets, and the residence nil-rate band that applies only in certain circumstances. Inheritance tax itself is set by HM Revenue & Customs and works the same way across England, Wales, Scotland and Northern Ireland, unlike probate or intestacy rules, which differ by nation. This page covers how the bands work and stack together. For the wider mechanics of the tax, including exemptions, see inheritance tax.

The Nil-Rate Band: £325,000

The nil-rate band (NRB) is the basic tax-free allowance every individual has against their own estate, currently £325,000. It applies automatically, regardless of what the estate contains, whether or not there is a will, and whether or not the deceased owned a home. Value transferred to a UK-domiciled spouse or civil partner, or to a charity, is exempt and separate from the NRB. Any part of the estate above the available NRB (and any RNRB) is what can be taxed at the standard 40% rate, subject to reliefs such as business or agricultural property relief. The NRB has stayed at £325,000 since 2009 and, under the 2025 Budget, is frozen at that level until April 2031.

The Residence Nil-Rate Band: £175,000

The residence nil-rate band (RNRB) is an additional £175,000 allowance available only where a home, or a share of one, is left to direct descendants: children, grandchildren, and step, adopted or foster children and their own descendants. It does not apply automatically. The RNRB is capped at the value of the home actually passing to descendants, so if that share of the home is worth less than £175,000, the available RNRB is limited to that lower figure. Estates with no residence, or where the home passes to someone other than a direct descendant (a sibling, niece, nephew or unrelated beneficiary, for example), do not get the RNRB on that transfer.

How the Bands Stack

These figures assume the RNRB is available in full (a qualifying home passing to direct descendants) and, for the married couple column, that the full unused NRB and RNRB from a first death transfer to the survivor. Where only one band applies, or the home is worth less than the RNRB cap, the combined threshold is lower.

The £2 Million Taper

The RNRB does not survive on very large estates. It is reduced by £1 for every £2 that the estate's value is over the £2,000,000 taper threshold, checked against the net value of the estate immediately before death. For a single person relying on the standard £175,000 RNRB, that means the whole residence band disappears once the estate reaches £2.35 million (£2m plus £350,000 of taper room). For a surviving spouse or civil partner who has inherited a full transferable RNRB of £350,000, the taper allows for more room before it is wiped out completely, at an estate of around £2.7 million. The taper reduces only the RNRB; the £325,000 (or £650,000 transferred) nil-rate band is unaffected by estate size.

Transferable Bands for Spouses and Civil Partners

Any unused percentage of a deceased person's NRB and RNRB can transfer to a surviving spouse or civil partner, even if the first death happened many years, or decades, ago. If none of the first estate's NRB and RNRB were used, for example because everything passed to the surviving spouse under the spouse exemption, the survivor's estate can claim the full transferred amount on top of their own, for a maximum combined threshold of £650,000 NRB plus £350,000 RNRB, £1,000,000 in total. The claim is made against the second estate, not the first, and the transferred percentage (not a fixed sum) is what carries across, so partial use of the first estate's bands still transfers a partial, proportionate benefit.

The 40% Rate, and 36% for Charitable Giving

Anything in the estate above the available NRB and RNRB is charged at the standard inheritance tax rate of 40%. That rate drops to 36% on the whole taxable estate where 10% or more of the net estate (after debts, reliefs and exemptions, before the charitable gift itself) is left to a qualifying charity. Gifts to a UK-domiciled spouse or civil partner, and gifts to charity of any size, remain fully exempt and are not counted against the NRB or RNRB at all.

Frozen Until April 2031

The NRB (£325,000), the RNRB (£175,000) and the £2 million RNRB taper threshold were all confirmed frozen at their current levels until April 2031 in the 2025 Budget, extending an earlier freeze that had been due to end in 2030. None of these figures are indexed to inflation or house prices during the freeze, so a fixed threshold combined with rising asset values over that period can draw more estates into paying inheritance tax, or into a higher taxable amount, without any change in the law itself.

Pensions Are Joining the Estate From 2027 (Not Yet in Force)

A separate, forthcoming change will affect the value of many estates rather than the threshold itself: from 6 April 2027, most unused pension funds and death benefits will be brought within the value of the estate for inheritance tax purposes, following the Autumn 2024 Budget. This is not the current position. For a death before 6 April 2027, most pension death benefits remain outside the estate as they are today. Anyone estimating inheritance tax on pension wealth for a death after that date should treat the pension as part of the estate; for a death before it, the pre-2027 treatment still applies.

Working Out Where an Estate Stands

Because the nil-rate band, the residence nil-rate band, the £2 million taper and any transferred allowance from a late spouse all interact, the same total estate value can produce very different tax outcomes depending on who inherits the home and whether bands have already been used. The UK inheritance tax calculator applies this formula, including the taper, to a specific estate value, home value and marital status, and shows the working. It gives an estimate only. Always check the current thresholds on gov.uk, and take professional advice for an estate close to a threshold, holding business or agricultural assets, or with lifetime gifts to account for; see the 7-year rule on gifts for how gifts made before death interact with these bands.

This page explains how the inheritance tax threshold works in general terms and is not personalised advice. Whether an estate qualifies for the residence nil-rate band, how much unused allowance transfers from an earlier death, and how the taper applies to a specific estate all depend on individual facts. Check the current thresholds on gov.uk before relying on any figure, and take advice from a solicitor or accountant for an estate near these limits. See the UK wills and probate hub, inheritance tax, the 7-year rule on gifts, deed of variation and the United Kingdom country hub for related topics.