Policy paper

Inheritance Tax — thresholds

Published 26 November 2025

Who is likely to be affected

This measure affects the estates of deceased persons and their personal representatives where the value of the estate exceeds the nil-rate band (NRB) and where the value of a qualifying residence exceeds the residence nil-rate band (RNRB). 

It also affects individuals who make lifetime chargeable transfers and trustees of relevant property trusts who are liable to periodic Inheritance Tax (IHT) and exit charges. 

It also affects the estates of deceased persons and their personal representatives involving claims for Agricultural Property Relief (APR) or Business Property Relief (BPR). 

General description of the measure

This measure fixes the IHT thresholds at their current levels for one further tax year in 2030 to 2031. This measure will fix the: 

• NRB at £325,000
• RNRB at £175,000
• RNRB taper, starting at £2 million
• combined £1 million allowance for 100% APR and BPR relief

Policy objective

This policy supports fiscal responsibility, helping the tax system support public finances and fund public services. 

Background to the measure

This measure was announced at Budget 2025. 

There are 2 nil-rate bands within IHT. Subject to available reliefs and exemptions, tax is payable to the extent the net value of the estate exceeds these nil-rate bands. 

The £325,000 NRB is available to all individuals and can be set against all asset types on their death. The NRB can also be used both: 

• to allow individuals to make lifetime chargeable transfers up to £325,000 within a 7-year period without an IHT liability
• in calculating the periodic and exit charges on relevant property trusts

The £175,000 RNRB is available to those passing on a qualifying residence on death to their direct descendants. A taper reduces the amount of the RNRB by £1 for every £2 that the net value of the estate is more than £2 million. 

Any unused NRB or RNRB following the death of an individual can be transferred to their surviving spouse or civil partner. This means that since 6 April 2020, qualifying estates have been able to pass on up to £500,000 and if the NRB and RNRB remain unused, the qualifying estate of a surviving spouse or civil partner is still able to pass on up to £1 million without an IHT liability. 

The NRB has been fixed at £325,000 since the tax year 2009 to 2010. 

The RNRB was introduced in the tax year 2017 to 2018, starting at £100,000 and increasing by £25,000 each year until reaching £175,000 in 2020 to 2021. The taper threshold has been set at £2 million since the RNRB was introduced. 

Legislation was introduced in Finance Act 2021 to fix the thresholds at their 2020 to 2021 levels up to and including 2025 to 2026. 

Finance Act 2023 amended Finance Act 2021 to fix the thresholds at these levels up to and including 2027 to 2028. Finance Act 2025 further amended Finance Act 2021 to maintain the thresholds up to and including 2029 to 2030. 

The current legislative default is for the NRB, RNRB and threshold for the RNRB taper to increase in line with the Consumer Prices Index (CPI) in each year from 2030 onwards.

The government announced at Autumn Budget 2024 that a new £1 million allowance will apply to the combined value of property in an estate qualifying for the 100% rate of APR or BPR. It was announced in July 2025 that the allowance will be indexed in line with CPI, and as with the NRB and RNRB thresholds, it would be fixed at that level up to and including the tax year 2029 to 2030. Budget 2025 announced an extension for a further year.

Detailed proposal

Operative date

The measure will take effect in relation to the tax years 2030 to 2031 and will affect lifetime gifts made, relevant property trust charges arising and deaths occurring on or after 6 April 2030.

Current law

Section 7 of the Inheritance Tax Act 1984 (IHTA) provides for the rates of IHT to be as set out in the table in schedule 1. The table states that the NRB is currently £325,000. Section 8 of the IHTA provides for the indexation of the NRB in line with CPI unless Parliament otherwise determines. 

Sections 8A to C of the IHTA provides that where an estate qualifies for the spouse or civil partner exemption, the unused proportion of the NRB when the first of the couple dies can be transferred to the estate of the surviving spouse or civil partner, so that the combined NRB can be up to £650,000. 

Section 8D(5) of the IHTA provides the amount of the RNRB where the interest in a home passes on death to direct descendants. Section 8K of the IHTA provides for the definition of a direct descendant. The RNRB increased from £100,000 for the tax year 2017 to 2018 to £175,000 for the tax year 2020 to 2021. 

Section 8D(5) of the IHTA outlines the “taper threshold” which reduces the amount of the RNRB by £1 for every £2 the net value of the estate is worth more than the £2 million taper threshold. 

Section 8G of the IHTA provides that where the RNRB is not fully used, the unused proportion of the RNRB can be transferred to the estate of the surviving spouse or civil partner. The combined RNRB can be up to £350,000. 

Section 8D(6) and (7) of the IHTA provides for the indexation of the RNRB and taper threshold set out in section 8D(5) unless Parliament otherwise determines. 

Section 86 Finance Act 2021, as amended, provides that section 8 and section 8d (7) of IHTA does not apply up to and including 2029 to 2030. 

This means that the NRB is fixed at £325,000, the RNRB is fixed at £175,000 and the taper threshold is fixed at £2 million until the end of 2030.

Proposed revisions

Legislation will be introduced in Finance Bill 2025-26 to fix the NRB, RNRB, and RNRB taper threshold at their current levels until the end of the tax year 2030 to 2031.

The legislation will amend section 86 Finance Act 2022 to disapply the indexation provisions in sections 8 and 8D of the IHTA for the tax year 2030 to 2031. 

Legislation will also be introduced in Finance Bill 2025-26 to increase the £1 million allowance for the 100% rate of APR and BPR in line with CPI from 6 April 2031.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
Nil	Nil	Nil	Nil	Nil	+130

These figures are set out in table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.

Macroeconomic impact

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families

More than 90% of estates are still forecast to have no IHT liability in each of the next five years. 

Fixing thresholds will have an impact on all taxpaying estates forecast to have an IHT liability in 2030 to 2031. Compared to increasing the thresholds with the Consumer Price Index, this policy is forecast to increase the number of taxpaying estates in 2030 to 2031 by 2,100 and that the proportion of all UK deaths subject to IHT will rise by 0.3 percentage points in 2030 to 2031. 

This measure is expected overall to have no impact on individual’s experience of dealing with HMRC. It maintains the current NRB, RNRB and Taper rates, and fixes the level of the APR or BPR allowance.

This measure is not expected to have any direct impact on family formation, stability or breakdown.

Equalities impacts

This measure will affect all estates of deceased individuals liable to IHT. If a protected group is overrepresented in this population, then it will be disproportionately impacted. The majority of IHT is paid by the estates of individuals aged 75 or over (79%). IHT is also paid by the estates of slightly more women (51%) than men (49%).

HMRC does not currently hold data on the other protected characteristics of deceased individuals with estates liable for IHT and so cannot make an assessment of the impacts on those with shared protected characteristics.

This measure will have an indirect impact on the beneficiaries of estates liable to IHT as the value of the estate after IHT is paid will be lower than it otherwise would have been. HMRC does not currently hold data on the protected characteristics of the beneficiaries of estates and so cannot make an assessment of the impacts on those with shared protected characteristics, but the impact of this measure on groups with protected characteristics is expected to be proportionate with the population of the estates of the deceased and trustees claiming APR, BPR and paying IHT each year. 

Administrative impact on business including civil society organisations

This measure is expected to have a negligible impact on professional advisers and other businesses as it maintains the current NRB, RNRB and Taper rates, and fixes the level of the APR or BPR allowance. One-off costs will include businesses familiarising themselves with the extension. There are not expected to be any further one-off or continuing costs. 

Customer experience of advisers is expected to remain the same, as this measure does not alter how they interact with HMRC. 

There is expected to be no impact on civil society organisations.

Operational impact (£ million) (HMRC or other)

HMRC will incur operational costs to implement this measure. This will involve increased staffing costs dealing with the additional estates brought into IHT.

Other impacts

Other impacts have been considered and none have been identified. 

Monitoring and evaluation

Consideration will be given to monitoring this measure through information collected from IHT returns and kept under review through standard statistical reporting.

Further advice

If you have any questions about this change, contact Inheritance Tax: general enquiries.