Inheritance Tax nil-rate bands remain frozen until April 2030. Learn how this affects estates, the residence nil-rate band, and planning opportunities to maximise tax-free inheritance for loved ones.
The Inheritance Tax (IHT) nil-rate bands have been frozen for a number of years and had been set to remain at current levels until 5 April 2028. As part of the Budget measures, it was confirmed that the rates will remain at the same level for a further 2 years until 5 April 2030.
This means that:
- the nil-rate band will continue at £325,000;
- residence nil-rate band will continue at £175,000; and
- residence nil-rate band taper will continue to start at £2 million.
The residence nil rate band (RNRB) is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death. The allowance is available to the deceased person’s children or grandchildren.
Any unused portion of the RNRB can be transferred to a surviving spouse or partner. The RNRB is on top of the £325,000 nil-rate band. The allowance is available to the deceased person's children or grandchildren. Taken together with the current IHT limit of £325,000 this means that married couples and civil partners can pass on property worth up to £1 million (£325,000 x 2 plus £175,000 x 2) free of IHT to their direct descendants.
The transfer does not happen automatically and must be claimed from HMRC when the second spouse or civil partner dies. This is usually done by the executor making a claim to transfer the unused RNRB from the estate of the spouse or civil partner that died first.
There is a tapering of the RNRB for estates worth more than £2 million even where the family home is left to direct descendants. The additional threshold will be reduced by £1 for every £2 that the estate is worth more than the £2 million taper threshold. This can result in the full amount of the RNRB being tapered away.
