Inheritance Tax

Inheritance tax used to be a problem for other people. It isn't any more. The nil-rate band has been frozen at £325,000 since 2009 while house prices have roughly doubled, and from April 2027 pensions — for years the cleanest way to pass wealth to the next generation — move inside the estate. Together, these changes mean millions of households who never expected to pay IHT will now pay it, often substantially.

The good news is that the system contains a number of genuinely powerful planning tools. The spouse exemption is unlimited. The seven-year rule on gifts works exactly as advertised, provided it is used properly. There are annual exemptions almost no one claims, a £3,000 yearly gift allowance that can be carried forward one year, and a normal-expenditure-out-of-income rule that is one of the most under-used reliefs in the system. None of this requires complex trusts or offshore structures.

This guide is a plain-English walk-through of how IHT works in 2026, what is changing, and what families can actually do about it. It covers the nil-rate band and residence nil-rate band, the spouse exemption and transferable allowances, the gift rules, trusts (when they help and when they don't), the April 2026 Business Relief / APR / AIM reset, and what £1m of combined allowances really protects in practice. It includes a worked example — the Mitchells, a retired couple under the post-April 2027 rules with ten years to plan — and a glossary at the back.

It is written to help families make confident decisions about their own estate, not to sell a product. Read it in about fifteen minutes.