What is the inheritance tax threshold in the UK?
Last updated 25th March 2024
4 min read
The inheritance tax threshold in the UK is the amount of inheritance you can receive tax-free before having to pay the inheritance tax rate. This is also known as the 'nil-rate band allowance'. The standard rate of inheritance tax above this threshold is 40%.
Inheritance and its related terms can be complex. If you’re not too familiar with the subject, first take a look at our glossary at the end of this article. You may also find our How to calculate your inheritance tax guide useful.
There are also ways to reduce or avoid the 40% inheritance tax threshold. For example, leaving money to charity. Read our complete guide to inheritance for more on this.
The current inheritance tax threshold in the UK for 2024/2025
In the UK, the standard inheritance tax threshold is £325,000. This means you’ll be taxed 40% on any inheritance that goes above this threshold. You won't be taxed for any amount under this threshold.
The inheritance tax threshold will stay the same(www.gov.uk opens in a new tab) until at least April 2028, remaining at £325,000. This includes the 'residence nil-rate band', which will remain at £175,000. And it also includes the 'residence nil-rate band taper', which will continue to start at £2 million.
However, there are certain circumstances where the threshold may increase. In these cases, your tax-free allowance would be higher.
If you’re trying to calculate your inheritance tax, it’s important to know which thresholds apply to you and whether you qualify for one higher than the standard £325,000 allowance.
The next section explains the factors that can affect this. And as always, it’s a sensible idea to talk to a financial adviser if you’re unsure.
Factors that can affect the inheritance tax threshold
The standard inheritance tax threshold in the UK is £325,000. But there are circumstances where this may increase. It depends on what the estate comprises of, and who the beneficiaries are.
In some cases, a person's threshold can be increased to £500,000. (Or more if the nil-rate band and residence nil-rate band are transferred between partners.) For example, the tax threshold rises to £500,000 if you leave your home to your children or grandchildren.
Residence nil-rate band (RNRB)
The residence nil-rate band(www.gov.uk opens in a new tab) is an allowance given to the children or grandchildren of the deceased. It applies if they are inheriting a main home (as long as the estate is worth less than £2 million). It's currently £175,000, and can be used with the standard nil-rate band. This would increase the total tax-free allowance to £500,000.
If the total value of the estate exceeds this £500,000, then the standard 40% tax rate will be applied to the amount above.
Married couples and civil partners
If you’re married or in a civil partnership, the rules can be a little different. There are two key points to remember:
- If you leave everything above the threshold to your spouse or civil partner, it is all exempt from tax. (As long as they're living in the UK).
- If you don’t use all or even any of your allowance, the remaining amount can be transferred to your partner(www.gov.uk opens in a new tab). This includes the residence nil-rate band previously mentioned.
Together, these two rules mean the full nil-rate band and residence nil-rate band could be transferred to a surviving partner. This can leave them with up to £1 million in tax-free allowance.
Inheritance tax threshold terms explained
| Term | Meaning |
|---|---|
| Nil-rate band | The threshold where someone's total asset value becomes subject to inheritance tax. |
| Residence nil-rate band | An extra inheritance tax allowance. It may apply when a main home is passed on to direct descendants, such as children or grandchildren. |
| Transferable nil-rate band | When any unused portion of the inheritance tax threshold is transferred to the deceased's surviving spouse or civil partner. |
| Taper relief | A tax relief mechanism that may apply to gifts made within seven years of death. Taper relief reduces the amount of inheritance tax owed on such gifts. The amount depends on a sliding scale based on the number of years that have passed since the gift was made. |
| Estate | The net worth of a person's assets, such as money, property, and investments. |
| Beneficiaries | People who are entitled to receive a share of the assets from the estate. |
Further reading
- A complete guide to inheritance
- What is the Guaranteed Inheritance Plan?
- What happens if you die without a will
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