Last updated: 16 October 2026
Why are inheritance tax receipts at record highs?
Inheritance tax receipts keep rising because the main thresholds have been frozen while house prices and asset values have grown. The nil-rate band has stayed at £325,000 since 2009 and the residence nil-rate band at £175,000 since 2020, and both are frozen until April 2031. From April 2026, 100% agricultural and business property relief is capped at £2.5 million, and from April 2027 unused pension funds will count towards estates. More families are paying IHT who never expected to.
What’s changed
| Change | Start |
| Nil-rate band frozen at £325,000 | To April 2031 |
| Residence nil-rate band £175,000 | To April 2031 |
| APR and BPR 100% capped at £2.5m, 50% above | April 2026 |
| Unused pensions included in estates | April 2027 |
| AIM shares relief 50% | April 2026 |
| Residence-based IHT (10 of 20 years) | April 2025 |
Who is affected
- Homeowners in areas with high property values
- People with large pension savings they don’t expect to spend
- Farmers and family business owners with assets above £2.5 million
- Estates over £2 million, where the residence nil-rate band tapers away
How much is IHT?
IHT is 40% on the estate above the available nil-rate bands, or 36% if at least 10% goes to charity. A married couple can pass up to £1 million tax-free, using both nil-rate bands and both residence nil-rate bands.
Example
David and Ann’s estate is worth £1.4 million, including a £700,000 home and £300,000 of pensions they won’t use. When the second dies after April 2027, the estate including pensions is £1.4 million. After £1 million of nil-rate bands, IHT is 40% × £400,000 = £160,000.
Planning options
- Gifts out of normal income, which are immediately exempt
- The £3,000 annual exemption
- Lifetime gifts that become exempt after 7 years
- Life insurance written in trust
- Charitable gifts of at least 10% to reduce the rate
- Reviewing pension and will arrangements
Common mistakes
- Assuming the estate is too small
- Not using the transferable bands
- Leaving no will
- Forgetting pensions from 2027
Records to keep
Keep a record of gifts, with dates and amounts, and of regular gifts out of income, so executors can claim exemptions.
The effect of the pension change
From 6 April 2027, most unused pension funds and death benefits will be included in the value of an estate. Personal representatives will be responsible for reporting and paying the tax, working with pension scheme administrators. For people who planned to pass on pensions free of IHT, this is the biggest change in years, and many are reviewing whether to draw more from pensions during their lifetime and give it away.
Spouse and charity exemptions
Everything left to a spouse or civil partner is exempt, and any unused nil-rate band passes to the survivor. Gifts to UK charities are exempt too, and leaving at least 10% of the net estate to charity cuts the rate on the rest to 36%.
Frequently asked questions
Who pays the IHT?
The executors, from the estate.
Can IHT be paid in instalments?
Yes, on property and some business assets, over 10 years.
Are gifts to a spouse taxed?
No, if both are UK domiciled or long-term resident.
Does IHT apply to ISAs?
Yes, they form part of the estate.
Getting advice
Inheritance tax planning works best when started early, so that gifts have time to pass the 7-year limit.
Related: gifting money to reduce IHT, inherited pensions and reducing an estate below £2m.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with inheritance tax planning review. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
