The Nil-Rate Band (£325,000)

Key facts

The NRB for 2025/26 is £325,000 per person.
It has been frozen at £325,000 since April 2009 and is confirmed frozen until at least April 2028.
Any unused NRB can be transferred to a surviving spouse or civil partner.
Married couples can effectively have a combined NRB of up to £650,000.
Gifts made within 7 years of death use up the NRB before it is applied to the estate.

What Is the Nil-Rate Band?

The nil-rate band (NRB) is the threshold below which no Inheritance Tax is charged. It is the single most important number in IHT — the first £325,000 of a person’s estate is taxed at 0% (nil rate), and only the excess is charged at 40%.^[1]

Tax Year	Nil-Rate Band	Status
2025/26	£325,000	Frozen
2024/25	£325,000	Frozen
2023/24	£325,000	Frozen
2009/10 – 2022/23	£325,000	Frozen
2008/09	£312,000	—
2007/08	£300,000	—

How the NRB Works in Practice

The NRB is applied to the deceased’s “cumulative total” of chargeable transfers. This includes:^[2]

The value of the estate at death
Any chargeable lifetime transfers (CLTs) made in the 7 years before death
Any potentially exempt transfers (PETs) that fail because the donor died within 7 years

The NRB is allocated to transfers in chronological order — the oldest transfer uses the NRB first. If lifetime transfers use up the full NRB, the entire estate is taxed at 40%.

Example: Sarah made a £200,000 gift into a trust 5 years before she died. Her estate is worth £400,000. The £200,000 CLT uses £200,000 of her NRB, leaving £125,000 of NRB for her estate. IHT on the estate: (£400,000 − £125,000) × 40% = £110,000.

Transferable Nil-Rate Band (TNRB)

Since October 2007, any NRB unused on the first death can be transferred to the surviving spouse or civil partner’s estate. This is known as the transferable nil-rate band (TNRB).^[3]

Key points about TNRB:

It is the unused percentage that transfers, not a fixed amount
If the first spouse used none of their NRB (e.g. left everything to their spouse), 100% transfers
The transferred percentage is applied to the NRB in force at the second death
You must claim TNRB — it is not applied automatically (use form IHT402)
There is no time limit on the claim — it works even if the first death was decades ago

Example: John died in 2005 when the NRB was £275,000. He left everything to his wife Mary, using 0% of his NRB. Mary dies in 2025/26 when the NRB is £325,000. The estate claims 100% of John’s unused NRB, giving Mary an effective NRB of £325,000 + £325,000 = £650,000.

NRB Combined with the Residence Nil-Rate Band

The residence nil-rate band (RNRB) is a separate, additional allowance of up to £175,000 that applies when a qualifying home is passed to direct descendants. When combined with the standard NRB:^[2]

Scenario	NRB	RNRB	Total Tax-Free
Single person	£325,000	£175,000	£500,000
Married couple (both NRBs & RNRBs transferred)	£650,000	£350,000	£1,000,000

Strategies for Using the NRB

Several estate planning approaches make effective use of the NRB:

NRB legacy in a will — leaving £325,000 to children (or a trust), with the remainder to the spouse, uses the NRB on the first death
Relying on TNRB — leaving everything to the spouse on the first death, then claiming the transferable NRB on the second death. This is simpler but less flexible.
Lifetime gifts — making gifts early (and surviving 7 years) so the NRB is fully available for the estate at death
Equalising estates — ensuring both spouses have sufficient assets to use their individual NRBs

Frequently Asked Questions

What is the nil-rate band?

The nil-rate band (NRB) is the Inheritance Tax threshold — the amount of an estate that is taxed at 0% (nil). For 2025/26, it is £325,000. Only the value of the estate above this threshold is charged to IHT at 40%.

Can the nil-rate band be transferred between spouses?

Yes. If the first spouse to die does not use all of their NRB (for example, because they leave everything to their surviving spouse under the spouse exemption), the unused percentage can be transferred to the surviving spouse’s estate. This can effectively double the NRB to £650,000.

How do lifetime gifts affect the nil-rate band?

Chargeable lifetime transfers (such as gifts into trust) and potentially exempt transfers that fail (because the donor dies within 7 years) are set against the NRB in chronological order. If these gifts use up the NRB, the full estate is charged at 40%.

Why has the nil-rate band been frozen?

The NRB has been frozen at £325,000 since April 2009 as a Government revenue measure. Despite inflation, successive governments have chosen to keep it at this level. In real terms, this means that more estates are gradually brought into the IHT net each year.

Sources

Inheritance Tax rates and thresholds — GOV.UK
Inheritance Tax nil-rate band and residence nil-rate band — GOV.UK
Transferable nil-rate band — GOV.UK
IHTM43001 – Transferable nil rate band — HMRC