Nil Rate Band Guide
A plain-English guide to how much of an estate can pass on death Inheritance Tax-free — covering the standard Nil Rate Band, the Residence Nil Rate Band, transferable allowances, and the taper threshold.
What Is the Nil Rate Band?
A quick explainer before you work out an estate’s Inheritance Tax position.
Definition & Purpose
The tax-free threshold that sits at the heart of Inheritance Tax
The Nil Rate Band is the portion of a person’s estate that can be passed on when they die without any Inheritance Tax being charged. It currently stands at £325,000 per individual.
Anything in the estate above the Nil Rate Band is generally taxed at 40%, unless it qualifies for another relief or exemption, such as gifts to a spouse, civil partner, or charity, which are usually exempt regardless of value.
On top of the standard band, many estates can also benefit from the Residence Nil Rate Band, an additional allowance available when a main home is left to direct descendants, which can significantly increase the total tax-free amount.
Quick Facts
Key things to know about the Nil Rate Band
How the Allowances Combine
Here’s the general order estates work through when calculating what’s tax-free.
Apply the Standard Nil Rate Band
The first £325,000 of the estate is automatically tax-free, before any other reliefs or exemptions are considered.
Add the Residence Nil Rate Band
If a main residence is left to children, grandchildren, or other direct descendants, up to an extra £175,000 can be added to the tax-free amount.
Claim Any Transferred Allowance
If a spouse or civil partner died previously and didn’t use their full allowance, the unused percentage can be transferred and added to the second estate.
Check the Taper Threshold
For very large estates over £2 million, the Residence Nil Rate Band starts to reduce, so it’s worth checking whether tapering applies before finalising figures.
Allowances at a Glance
A summary of the main Inheritance Tax thresholds and how far they can stretch for a couple.
| Allowance | Per Person | Per Couple (if both unused) |
|---|---|---|
| Standard Nil Rate Band | £325,000 | £650,000 |
| Residence Nil Rate Band | £175,000 | £350,000 |
| Combined Total | £500,000 | £1,000,000 |
Standard Band vs. Residence Band
The two allowances work differently and have separate conditions attached.
| Feature | Standard Nil Rate Band | Residence Nil Rate Band |
|---|---|---|
| Applies to | Any assets in the estate | A main residence only |
| Who it must pass to | Anyone | Direct descendants (children, grandchildren) |
| Automatic? | Yes | Yes, if conditions are met |
| Reduced for large estates? | No | Yes, tapered above £2 million |
| Transferable to spouse? | Yes | Yes |
Nil Rate Band FAQ
Answers to the questions people ask most often when planning or handling an estate.
The Nil Rate Band is the amount of an estate that can pass on death without any Inheritance Tax being due. It currently stands at £325,000 per person, and anything above this threshold is generally taxed at 40%, unless other reliefs or exemptions apply.
The Residence Nil Rate Band is an additional tax-free allowance, currently up to £175,000, available when a main residence is left to direct descendants such as children or grandchildren, on top of the standard Nil Rate Band.
Yes. Any unused percentage of the Nil Rate Band and Residence Nil Rate Band from a deceased spouse or civil partner can be transferred to the surviving spouse’s estate, potentially doubling their available tax-free allowance.
If an estate is worth more than £2 million, the Residence Nil Rate Band is gradually reduced by £1 for every £2 over that threshold, and can be reduced to zero for very large estates.
The standard Nil Rate Band is applied automatically when Inheritance Tax is calculated. However, transferring any unused Nil Rate Band or Residence Nil Rate Band from a late spouse or civil partner must be actively claimed using the relevant forms when applying for probate.