Key facts
- IHT replaced Capital Transfer Tax (CTT) on 18 March 1986.
- The standard rate has been 40% since 1988 (it was briefly 60% on the top band from 1986–1988).
- The nil-rate band has been frozen at £325,000 since April 2009 — confirmed frozen until at least April 2028.
- The residence nil-rate band (£175,000) was introduced in April 2017 and has been frozen since April 2021.
- The 36% reduced rate for charitable estates was introduced in April 2012.
IHT Rate History
Inheritance Tax was introduced on 18 March 1986, replacing Capital Transfer Tax (CTT). Since 1988, the standard rate has been a flat 40% on the taxable estate above the nil-rate band. The only variation is the 36% reduced rate for estates leaving 10%+ to charity, available since April 2012.[1]
Nil-Rate Band History
The nil-rate band is the tax-free threshold below which no IHT is charged. It has been frozen at £325,000 since April 2009:[3]
| Tax Year | Nil-Rate Band | Notes |
|---|---|---|
| 2028/29 | £325,000 | Frozen confirmed (Autumn Budget 2024) |
| 2027/28 | £325,000 | Frozen confirmed |
| 2026/27 | £325,000 | Frozen confirmed |
| 2025/26 | £325,000 | Current year — frozen |
| 2024/25 | £325,000 | Frozen |
| 2021/22 – 2023/24 | £325,000 | Frozen (Spring Budget 2021) |
| 2009/10 – 2020/21 | £325,000 | Frozen from 2009 |
| 2008/09 | £312,000 | |
| 2007/08 | £300,000 | Transferable NRB introduced (Oct 2007) |
| 2006/07 | £285,000 | |
| 2005/06 | £275,000 | |
| 2004/05 | £263,000 | |
| 2003/04 | £255,000 | |
| 2002/03 | £250,000 | |
| 2000/01 – 2001/02 | £234,000 | |
| 1999/00 | £231,000 | |
| 1997/98 – 1998/99 | £215,000 | |
| 1996/97 | £200,000 | |
| 1995/96 | £154,000 | |
| 1991/92 – 1994/95 | £140,000 – £150,000 | Gradual increases |
| 1988/89 – 1990/91 | £110,000 – £128,000 | Single 40% rate from 1988 |
| 1986/87 – 1987/88 | £71,000 – £90,000 | IHT introduced March 1986 |
The real cost of the freeze: If the NRB had risen with CPI inflation since 2009, it would be approximately £450,000 in 2025/26. The freeze effectively means more estates are being drawn into the IHT net each year as asset values (especially property) continue to rise.
Residence Nil-Rate Band History
The RNRB was phased in over four years from April 2017:[3]
| Tax Year | RNRB | Combined NRB + RNRB (per person) |
|---|---|---|
| 2025/26 (current) | £175,000 | £500,000 |
| 2020/21 – 2024/25 | £175,000 | £500,000 |
| 2019/20 | £150,000 | £475,000 |
| 2018/19 | £125,000 | £450,000 |
| 2017/18 | £100,000 | £425,000 |
| Before 2017/18 | N/A | £325,000 |
IHT Rate Changes Timeline
| Date | Change |
|---|---|
| 18 March 1986 | IHT introduced (replacing CTT). Rates: 30%–60% in bands. |
| 15 March 1988 | Simplified to a single rate of 40% above the NRB. |
| 9 October 2007 | Transferable NRB introduced for surviving spouses. |
| 6 April 2012 | 36% reduced rate for estates leaving 10%+ to charity. |
| 6 April 2017 | Residence nil-rate band introduced at £100,000. |
| Autumn Budget 2024 | NRB and RNRB freeze extended to April 2028. BPR/APR capped from April 2026. Pensions brought into IHT from April 2026. |
Looking ahead: The Autumn Budget 2024 confirmed the NRB and RNRB will remain frozen until at least April 2028. From 6 April 2026, BPR and APR on business and agricultural assets are capped at £2.5 million per estate (100% relief on the first £2.5m, then 50%) — raised from an originally-announced £1 million on 23 December 2025 — and from April 2027 unused pension funds will be brought within the scope of IHT.[2]
Frequently Asked Questions
How long has the nil-rate band been frozen?
The NRB has been £325,000 since April 2009 — over 16 years. It was originally due to increase with inflation, but successive governments have extended the freeze. It is now confirmed frozen until at least April 2028. If it had risen with CPI inflation, it would be approximately £450,000 in 2025/26.
Has the IHT rate always been 40%?
No. When IHT was introduced in 1986, there were multiple bands with rates up to 60%. The system was simplified in 1988 to a single rate of 40% above the nil-rate band. The only variation since then is the 36% reduced rate for charitable estates (introduced 2012).
When was the residence nil-rate band introduced?
The RNRB was introduced on 6 April 2017 at £100,000, rising by £25,000 each year to reach £175,000 in April 2020. It was due to increase with CPI from April 2021, but has been frozen at £175,000 until at least April 2028.
What was Capital Transfer Tax?
Capital Transfer Tax (CTT) was the predecessor to IHT, in effect from 1975 to 1986. CTT charged tax on all lifetime gifts at graduated rates (not just on death or within 7 years). IHT replaced CTT with the current system of PETs and CLTs.
Further Reading
- The Nil-Rate Band (£325,000) — the current threshold in detail
- The Residence Nil-Rate Band — the additional £175,000 allowance
- What Is Inheritance Tax? — overview of how IHT works
- Transferable Nil-Rate Band — combining spouse NRBs
Looking for simple tax software?
#GoFile is HMRC-recognised and trusted by 50,000+ UK businesses. Set up in minutes, file with confidence.
Get Started For FreeNo credit card required · Cancel anytime