Key 2026/27 IHT allowances
The ordinary IHT nil-rate band is £325,000 per individual and the residence nil-rate band is up to £175,000 where its conditions are met. The additional residence band is not a general extra exemption for any investment property: it generally concerns a qualifying residence passing to direct descendants, and is tapered for estates over £2 million.
Unused qualifying bands may be transferable between spouses and civil partners, potentially producing combined allowances in appropriate estates. The standard IHT rate on the taxable part of an estate is 40%, subject to reliefs, exemptions and special rates.
Married couples, beneficial shares and wills
Property held as beneficial joint tenants generally passes to the survivor by survivorship, while a beneficial tenant-in-common share can be disposed of under a will. That distinction affects succession planning and who receives the value on death.
Transfers between spouses or civil partners can benefit from important IHT exemptions, but cross-border residence and other facts may restrict the extent of exemption. An up-to-date will and an accurate record of ownership are as important as headline allowances.
Lifetime gifts and the seven-year rule
An outright gift to an individual may be a potentially exempt transfer for IHT. Ordinarily, survival for seven years can place it outside the donor's estate, provided no disqualifying benefit was retained. Gifts within seven years can reduce the nil-rate band or lead to further tax; taper relief is more nuanced than assuming the property's whole value gradually becomes exempt.
Available exemptions may include the £3,000 annual gift allowance, small gifts and qualifying normal expenditure out of income, all subject to conditions and adequate evidence. These allowances do not override CGT, SDLT or lender requirements.
Gifts with reservation and pre-owned assets
Giving a home to a child but continuing to occupy it rent-free commonly produces a gift with reservation of benefit. The house may therefore remain in the donor's IHT estate even after seven years. Full market rent and genuinely ending the benefit may change the analysis, but should be assessed carefully alongside the separate pre-owned assets and related rules.
A trust is not automatically an IHT shelter. Relevant property trust entry, anniversary and exit charges, settlor-benefit rules, CGT and registration requirements can be relevant.
Owners who live or die outside the UK
UK-situated property remains relevant to UK IHT for overseas owners, subject to the applicable exemptions and the way an asset is held. Since 6 April 2025 the long-term UK residence framework can bring overseas assets into the IHT net after sufficient years of UK residence, with possible continuing exposure after departure.
Treaty relief, marital status, the IHT position of an overseas spouse, the character of trusts and the location of assets require cross-border advice. No single rule based only on nationality determines liability.