UK Inheritance Tax (IHT) 2026: Thresholds & Residence-Based Rules
UK Inheritance Tax rates, nil-rate bands, Residence Nil-Rate Band and the residence-based rules for UK and overseas assets from 6 April 2025.
Key Statutory Takeaways
Statutory Rules & Core Thresholds
Nil-Rate Band: £325,000. Residence Nil-Rate Band (RNRB): up to £175,000. Combined married couple threshold: up to £1,000,000. RNRB tapers £1 per £2 above £2M.
In-Depth Legal Framework & Analysis
Inheritance Tax (IHT) applies to the net value of an estate passed on death, as well as certain lifetime gifts and transfers into trusts. On 6 April 2025, the UK implemented a major structural reform, abandoning the centuries-old domicile and deemed-domicile regime in favor of a modern residence-based system. Under the new statutory framework, individuals who have been UK tax resident for at least 10 out of the 20 tax years preceding a chargeable event are classified as 'long-term UK residents' and are subject to UK IHT on their worldwide assets. Furthermore, leaving the UK does not immediately extinguish IHT liability: an 'IHT tail' of between 3 and 10 tax years continues to apply to worldwide assets based on prior UK residence history.
IHT payment is due by the end of the 6th month after death (interest applies thereafter). Full estate accounts (IHT400) are generally submitted within 12 months.
40% statutory tax on taxable estate above thresholds; 36% for charitable gifts (≥10% of net estate); 20% on chargeable lifetime transfers into relevant property trusts.
🧮 Basic IHT Example
Scenario: An estate is worth £1 million, the deceased has the full £325,000 NRB and full £175,000 RNRB, and the qualifying residence passes to direct descendants.
Tax Payable: £500,000 × 40% = £200,000 IHT liability
Frequently Asked Questions: UK Inheritance Tax (IHT) 2026: Thresholds & Residence-Based Rules
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Primary Statutory Authority
🏛️ Residence-Based IHT & Long-Term Residence Rules (from 6 April 2025)
The UK replaced the former domicile and deemed-domicile regime with a statutory long-term UK residence test for worldwide assets.
| Years of UK Residence | Worldwide IHT Tail |
|---|---|
| 10 to 13 years | 3 years |
| 14 years | 4 years |
| 15 years | 5 years |
| 16 years | 6 years |
| 17 years | 7 years |
| 18 years | 8 years |
| 19 years | 9 years |
| 20 years | 10 years |
Frequently Asked Questions
The standard Nil-Rate Band is £325,000. A further Residence Nil-Rate Band of up to £175,000 may be available when a qualifying residence passes to direct descendants, giving a potential total of £500,000 for an individual before other reliefs and exemptions.
The standard rate is 40% on the taxable portion of an estate above the available thresholds. A reduced 36% rate can apply where the relevant charitable-giving conditions are met.
From 6 April 2025, the overseas-asset rules are principally based on long-term UK residence rather than domicile. An individual is generally long-term UK resident after being UK resident for at least 10 of the 20 tax years immediately preceding the relevant chargeable event.
No. A former long-term UK resident can remain within the overseas-asset IHT rules after leaving the UK. The post-departure period can range from 3 to 10 tax years depending on the individual's previous UK residence history.
Potentially. Unused Nil-Rate Bands and Residence Nil-Rate Bands can generally be transferred between spouses or civil partners. Where both full £325,000 NRBs and £175,000 RNRBs are available and all conditions are satisfied, up to £1 million can potentially be available on the second death.
For a death estate, IHT is generally due by the end of the sixth month after the month of death. Interest can apply to amounts paid late. The reporting requirements and forms depend on the size and circumstances of the estate.
Common Taxpayer Misconceptions
✓ Rule: The £175,000 RNRB requires a qualifying home left to direct descendants and tapers away for estates over £2M.
✓ Rule: Inheritance tax is due by the end of the 6th month after death; interest is charged on unpaid amounts after month 6.
✓ Rule: A 3-to-10-year post-departure tail applies to worldwide assets for individuals who were long-term UK residents.
✓ Rule: Direct gifts to individuals are Potentially Exempt Transfers (PETs) that become fully tax-free if the donor survives 7 years.