The nil-rate band is the threshold below which an estate pays no Inheritance Tax (IHT). Understanding it helps with estate planning.
The basics
The standard nil-rate band is £325,000 per person (2024/25). Estates worth below this pay no IHT. Above it, IHT is typically charged at 40%.
The residence nil-rate band
An additional £175,000 nil-rate band applies when a main residence is passed to direct descendants (children or grandchildren). This can bring the total IHT-free allowance to £500,000 per person — or up to £1 million for a married couple when both allowances are combined.
Transferable nil-rate band
Unused nil-rate band from a deceased spouse or civil partner can be transferred to the surviving spouse's estate, potentially doubling the available allowance.
Inheritance Tax planning is complex. Speak to a solicitor or financial adviser. This is general information only.