What is Nil Rate Band?
The £325,000 threshold below which no inheritance tax is charged on an estate.
Key Facts
- ✓ Current threshold: £325,000
- ✓ Frozen since 2009 — the longest-frozen threshold
- ✓ Unused NRB can transfer to surviving spouse (up to £650,000 combined)
- ✓ Applies to total estate including property and investments
- ✓ 40% tax charged on value above the NRB
Current Rates (2025/26)
- ▸ Nil rate band: £325,000
- ▸ Transferable: up to £650,000 for couples
Explanation
The nil rate band (NRB) is the inheritance tax threshold — the amount of an estate that can be passed on free of IHT. For 2025/26 it is £325,000, and it has been frozen at this level since 2009. Any value above the NRB is taxed at 40% (or 36% if qualifying charitable donations are made). The NRB is one of the longest-frozen tax thresholds in the UK. If the deceased was married or in a civil partnership and did not use their full NRB, the unused portion can be transferred to the surviving spouse's estate. This means a married couple could have a combined NRB of up to £650,000. The NRB applies to the total taxable estate, which includes property, savings, investments, and some gifts made within seven years of death.
Try the calculator: Use our free calculator to see how nil rate band affects your finances.
Inheritance Tax Calculator →Other Glossary Terms
The system HMRC uses to collect income tax and National Insurance directly from employee wages.
National InsuranceA UK tax on earnings and self-employed profits that funds the state pension, NHS, and benefits.
Personal AllowanceThe amount of income you can earn each year before paying income tax — currently £12,570.
Basic Rate (20%)The 20% income tax rate applied to taxable income between £12,571 and £50,270.
Higher Rate (40%)The 40% income tax rate applied to taxable income between £50,271 and £125,140.
Additional Rate (45%)The 45% income tax rate applied to taxable income above £125,140.
Frequently Asked Questions
What does nil rate band mean?
The £325,000 threshold below which no inheritance tax is charged on an estate.
Why does nil rate band matter?
Understanding nil rate band helps you make informed financial decisions and ensure you pay the correct amount of tax. Getting it wrong could mean overpaying or underpaying HMRC, which may result in penalties or missed savings. Use our calculators to see how nil rate band applies to your personal situation.
Where can I find more information about nil rate band?
HMRC publishes official guidance on GOV.UK for all UK tax topics. For a quick overview, our glossary entries are written in plain English and updated each tax year. You can also use our free online calculators to model different scenarios and understand how changes to your income, deductions, or allowances affect your overall tax position.