How Much Is Inheritance Tax in 2026? HMRC Receipts Rise as More Estates Face 40% Charge

Inheritance Tax is becoming a bigger concern for British families as frozen tax thresholds, property wealth and forthcoming changes to pensions push more estates towards a potential bill.

So, how much is Inheritance Tax in the UK in 2026?

The standard Inheritance Tax rate is 40%, but that does not mean HMRC takes 40% of everything someone leaves behind.

For the 2026/27 tax year, the normal tax-free allowance, known as the nil-rate band, remains £325,000. Inheritance Tax is generally charged at 40% only on the taxable value of an estate above the available allowances and after relevant exemptions and reliefs have been applied.

Someone passing a qualifying home to their children or grandchildren may also receive the £175,000 residence nil-rate band, potentially increasing their tax-free allowance to £500,000.

For married couples and civil partners, unused allowances can generally be transferred to the surviving partner. As a result, a qualifying couple may potentially leave as much as £1 million before Inheritance Tax becomes payable.

However, the £1 million figure is not a universal tax-free threshold. The residence allowance is subject to conditions and begins to taper away when an estate is worth more than £2 million.

The question is becoming particularly relevant in London.

The latest UK House Price Index, published on 19 August 2026, puts the average London property price at £554,000 in June 2026. Although that was 2.5% lower than a year earlier, it means an average London home by itself can be worth more than the maximum £500,000 individual allowance available when the full residence nil-rate band can be claimed.

That does not automatically mean the owner will pay Inheritance Tax. Mortgages and qualifying debts can reduce the estate, transfers between spouses and civil partners can be exempt, and numerous other allowances and reliefs may apply.

But it helps explain why a tax once associated mainly with very wealthy estates is attracting increasing attention from ordinary homeowners.

How Much Inheritance Tax Would Someone Actually Pay?

The simplest way to understand the tax is to look at the part of the estate that remains taxable.

For example, suppose an unmarried person dies leaving an estate worth £500,000 and does not qualify for the residence nil-rate band.

The calculation could broadly look like this:

Estate calculation	Amount
Total estate	£500,000
Standard nil-rate band	£325,000
Potentially taxable amount	£175,000
IHT at 40%	£70,000

If instead a qualifying person left a home to a child and was entitled to the full £175,000 residence nil-rate band, the combined allowance could be £500,000 and there may be no Inheritance Tax in that simplified example.

Consider a larger qualifying estate worth £750,000:

Estate calculation	Amount
Estate	£750,000
Nil-rate band	£325,000
Residence nil-rate band	£175,000
Total potential allowance	£500,000
Taxable amount	£250,000
IHT at 40%	£100,000

For a married couple or civil partners, the position can be substantially different because transfers between spouses or civil partners are normally exempt and unused nil-rate bands can potentially pass to the surviving partner.

If both the standard and residence allowances are available in full, the surviving partner’s estate could potentially have allowances totalling £1 million.

The standard rate can also fall to 36% on the relevant taxable estate where at least 10% of the qualifying net estate is left to charity.

Despite the 40% headline rate, the amount actually paid across an entire estate is often considerably lower because only part of the estate is taxable.

HMRC’s latest detailed Inheritance Tax statistics, published on 30 July 2026, show that the average effective rate across taxpaying estates in 2023/24 was 13%, after taking allowances, exemptions and reliefs into account.

Even so, the average actual bill among estates that did pay IHT reached £231,000, an increase of 9% compared with the previous year.

HMRC found that 30,400 estates resulted in an Inheritance Tax charge in 2023/24, equivalent to 4.72% of UK deaths.

That remains fewer than one in 20 deaths, but the proportion was the highest recorded since 2006/07.

Charlene Young, senior pensions and savings expert at AJ Bell, said following the figures:

“Inheritance Tax has become a growing concern for more families.”

Young highlighted frozen allowances as an important reason more households are becoming conscious of IHT and warned that the treatment of unused pensions from 2027 will widen the issue further.

Latest HMRC Figures Show Inheritance Tax Receipts Are Still Rising

The latest available real-time picture reinforces that trend.

HMRC’s monthly tax receipts bulletin, released on 21 August 2026, shows that the Treasury collected £3.2 billion in Inheritance Tax between April and July 2026.

That was approximately £100 million more than during the same period a year earlier.

HMRC also confirmed that June 2026 produced the highest monthly Inheritance Tax receipts on record.

The longer-term rise is even more striking.

HMRC collected £8.5 billion in Inheritance Tax during the 2025/26 tax year, compared with £3.5 billion in 2006/07.

HMRC says rising receipts are being driven by a combination of wealth transfers, increases in asset values and government decisions to keep the main IHT allowances frozen.

The £325,000 nil-rate band has not increased since April 2009 and is now scheduled to remain at that level through 5 April 2031.

This creates what tax professionals often describe as fiscal drag.

Even where tax rates do not rise, increasing property, investment and other asset values can gradually push more estates beyond a fixed threshold.

Shaun Moore, tax and financial planning expert at Quilter, said while discussing recent IHT figures:

“The broader direction remains clear, with more estates being drawn into scope as thresholds remain frozen.”

Moore has argued that asset values combined with frozen thresholds are steadily increasing the number of families that need to consider their potential liability.

For Londoners, that effect can be particularly significant because housing represents such a large proportion of household wealth.

At £554,000, the latest average London property value is more than £229,000 above the basic £325,000 IHT threshold. A detached London home had an average value of approximately £1.162 million in June 2026, while the average terraced property was around £641,000.

Again, property value alone does not determine the tax bill. But once savings, investments, second properties, businesses and other assets are added, an estate can quickly move above available allowances.

There have also already been significant changes in 2026 for people passing on farms and businesses.

From 6 April 2026, 100% Agricultural Property Relief and Business Property Relief is generally limited to a combined £2.5 million of qualifying agricultural and business assets. Qualifying value above that level normally receives 50% relief.

Unused allowance can potentially pass between spouses or civil partners, allowing up to £5 million of qualifying agricultural or business assets to benefit from 100% relief in appropriate circumstances.

A Bigger Inheritance Tax Change Arrives in April 2027

The next major development begins on 6 April 2027, when most unused pension funds and pension death benefits will be brought into a deceased person’s estate for Inheritance Tax purposes.

The change has already been legislated through the Finance Act 2026. HMRC published a second technical note explaining the implementation arrangements on 27 August 2026, making pension inheritance one of the most immediate IHT planning issues facing families.

At present, many discretionary pension funds can normally sit outside an estate for IHT purposes.

From April 2027, that advantage will largely disappear for affected pension benefits.

Government estimates suggest around 10,500 estates could become liable for IHT in 2027/28 that otherwise would not have had a liability, while approximately 38,500 estates could pay more Inheritance Tax than under the previous system.

HMRC estimates the average IHT liability among affected estates could increase by around £34,000 when pension assets are brought into calculations.

Not everything will be included. For example, qualifying death-in-service benefits from registered pension schemes are excluded from the changes.

Rachel Vahey, head of public policy at AJ Bell, has warned that the reform will also make administering estates more complicated.

She said:

“Personal representatives will now need to factor pensions into the IHT process alongside the estate’s other assets.”

Vahey said families and those dealing with estates will have additional administrative considerations once the new rules take effect.

There are still legitimate ways families can manage their potential Inheritance Tax exposure.

Gifts are one of the best-known examples. Individuals currently have a £3,000 annual gifting exemption, which can be divided among several people, with an unused allowance capable of being carried forward for one tax year.

Separate exemptions can apply to some small gifts, wedding or civil partnership gifts and qualifying regular gifts made out of surplus income.

Larger outright gifts may potentially fall outside the estate if the person making them survives for at least seven years.

However, the often-quoted seven-year rule is more complicated than simply giving assets away. Gifts where the person continues benefiting from an asset can remain within the estate, while gifts made within seven years of death can affect how the available nil-rate band and any IHT liability are calculated.

Where taxable gifts were made between three and seven years before death, taper relief can sometimes reduce the tax payable on the gift.

For households trying to answer “how much is Inheritance Tax?”, therefore, 40% is only the starting point.

The real bill depends on the total value and composition of the estate, whether a home passes to direct descendants, marital or civil partnership status, previous lifetime gifts, charitable giving, business or agricultural assets, debts and, from April 2027, unused pension wealth.

For the 2026/27 tax year, the key numbers remain a 40% standard rate, £325,000 basic nil-rate band and £175,000 residence nil-rate band, with qualifying married couples and civil partners potentially able to combine unused allowances.

What is changing is the number of estates coming close to those limits.

With IHT receipts already reaching £3.2 billion in the first four months of 2026/27, June setting a monthly record, the average taxpaying estate facing a £231,000 bill, thresholds remaining frozen until 2031 and pension wealth joining taxable estates from April 2027, Inheritance Tax is increasingly becoming an issue families may need to consider well before an estate is administered.

Figures and tax rules are correct as of 8 September 2026. Inheritance Tax can depend heavily on individual circumstances, so professional tax, legal or financial advice may be appropriate for complex estates.