Inheritance Tax (IHT) remains one of the most debated taxes in the UK. In the 2026/27 tax year, the key thresholds and rates remain largely unchanged, but the frozen nil-rate band continues to bring more families into the IHT net.
The nil-rate band remains frozen at £325,000, where it has been since 2009. With inflation and rising property prices, HMRC collected a record £7.8 billion in IHT receipts in the 2025/26 tax year — up from £7.5 billion the previous year.
The Residence Nil-Rate Band (RNRB) also remains at £175,000. This additional allowance applies when you leave your main residence to direct descendants (children, grandchildren, etc.). It's tapered for estates over £2 million.
One significant area of discussion is the future of Business Relief and Agricultural Property Relief. The government has indicated it may reform these reliefs, which currently allow qualifying assets to pass free of IHT. Any changes could have a major impact on family businesses and farms.
Gift planning remains an important IHT strategy. The seven-year rule still applies: gifts made more than seven years before death are generally exempt from IHT. Gifts made between three and seven years before death benefit from taper relief.
The annual exemption remains at £3,000 — unchanged since 1981. Many advisors believe this will be increased, but for now, it represents a modest but useful planning tool.
At Castle Family Legal, we stay up to date with all IHT developments to give you the best possible advice. Contact us for a review of your estate plan in light of the latest changes.
