If you live in the UK or own UK property, it’s essential to understand the Nil Rate Band (NRB)—the portion of your estate that can be passed on tax-free before Inheritance Tax (IHT) applies.

For the current tax year, the NRB is £325,000, meaning no IHT is due on the first £325,000 of your estate. Amounts above this are typically taxed at 40%.

If you leave your home to children or grandchildren, you may also qualify for the Residence Nil Rate Band (RNRB)—an additional allowance of up to £175,000, depending on your circumstances. This can increase your total IHT-free threshold to £500,000, or £1 million for married couples or civil partners.

However, estates valued over £2 million begin to lose the RNRB—reduced by £1 for every £2 above the threshold. Early estate planning is key to maximizing both allowances and minimizing IHT exposure.

How Money Tax Smart Can Help: We provide tailored advice on UK inheritance tax planning, including how to use the Nil Rate Band and Residence Nil Rate Band effectively. We help clients calculate potential IHT, explore trusts, gifts, and charitable donations, and assess how residence and domicile rules affect tax on overseas assets.