Data report
UK Inheritance Tax Burden by Estate Value 2026/27
Original analysis of effective IHT burden across estate values £325,000-£5,000,000. Shows the RNRB taper above £2m, the £2.35m "RNRB cliff" where the residence band fully tapers, and the impact of the April 2027 pension-in-estate reform.
The headline finding
An estate of £1,000,000 with primary residence passed to direct descendants and full RNRB + NRB available faces £200,000 Inheritance Tax for a single individual or £0 for a married couple able to combine allowances - assuming all allowances applied.
The RNRB taper begins at £2,000,000 and fully eliminates the £175,000 residence band by £2,350,000 estate value. This creates an effective marginal IHT rate of 60% on each pound of estate value in the £2m-£2.35m taper zone (40% IHT on the pound itself + 40% on the £0.50 of RNRB lost).
From April 2027, defined-contribution pension pots become part of the IHT estate for the first time since the pension tax framework began. HMRC's policy paper (Autumn Budget 2024) estimates this will pull approximately 10,500 additional estates per year into IHT by 2029/30, with around 38,500 estates affected overall by the broader policy package - a material extension of IHT scope from the current ~27,000 IHT-paying estates per year.
Key thresholds for 2026/27
| Allowance | 2026/27 value | Frozen until |
|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | April 2031 (since April 2009) |
| Residence Nil-Rate Band (RNRB) | £175,000 | April 2031 (since April 2020) |
| RNRB taper start | £2,000,000 | April 2031 |
| RNRB fully tapered | £2,350,000 | — |
| IHT rate | 40% | — |
| Reduced IHT rate (10% to charity) | 36% | — |
IHT burden by estate value: single vs married couple
Single person: full NRB £325,000 + RNRB up to £175,000 (if primary residence passes to direct descendants). Married couple: doubled allowances via transferable NRB and RNRB if first spouse died without using them, giving up to £1,000,000 combined allowance.
| Estate value | Effective RNRB | Single IHT | Single effective % | Married IHT | Married effective % |
|---|---|---|---|---|---|
| £325,000 | £175,000 | £0 | 0.0% | £0 | 0.0% |
| £500,000 | £175,000 | £0 | 0.0% | £0 | 0.0% |
| £750,000 | £175,000 | £100,000 | 13.3% | £0 | 0.0% |
| £1,000,000 | £175,000 | £200,000 | 20.0% | £0 | 0.0% |
| £1,250,000 | £175,000 | £300,000 | 24.0% | £100,000 | 8.0% |
| £1,500,000 | £175,000 | £400,000 | 26.7% | £200,000 | 13.3% |
| £2,000,000 | £175,000 | £600,000 | 30.0% | £400,000 | 20.0% |
| £2,350,000 | £0 | £810,000 | 34.5% | £680,000 | 28.9% |
| £2,500,000 | £0 | £870,000 | 34.8% | £740,000 | 29.6% |
| £3,000,000 | £0 | £1,070,000 | 35.7% | £940,000 | 31.3% |
| £4,000,000 | £0 | £1,470,000 | 36.8% | £1,340,000 | 33.5% |
| £5,000,000 | £0 | £1,870,000 | 37.4% | £1,740,000 | 34.8% |
The 60% RNRB taper cliff explained
Between £2,000,000 and £2,350,000 estate value, each £2 of additional estate reduces the RNRB by £1. This creates an effective marginal IHT rate of 60% on every pound of estate value in this band:
- 40% IHT on the additional £1 of estate
- + 40% IHT recovered on the £0.50 of RNRB now lost
- = 60% effective marginal rate
An estate at £2,000,000 retains full £175,000 RNRB. At £2,350,000 the RNRB is zero. The taper costs the estate £350,000 × 40% = £140,000 in additional IHT vs the £2m level - but only adds £350,000 to the estate value, leaving net £210,000 - effectively a 60% marginal tax on this £350k zone.
April 2027 pension inclusion: the biggest IHT reform in a generation
From 6 April 2027, defined-contribution pension pots (and unused defined-benefit cash lump-sum entitlements) become part of the IHT estate. Currently DC pensions sit outside the estate - one of the most valuable IHT planning opportunities for the past 20 years has been to hold wealth in pension and consume non-pension assets first.
The OBR projects the reform will:
- Increase IHT receipts by £640m in 2027/28, rising to £1.5bn/year by 2029/30
- Pull approximately 10,500 additional estates per year into IHT by 2029/30 from the pension inclusion specifically - on top of the existing 27,000 IHT-paying estates
- Around 38,500 estates affected overall by the broader Autumn Budget 2024 pension/IHT package by 2029/30
The reform interacts particularly painfully with the RNRB taper. A retiree with £1.5m of investments + £700k DC pension currently has £2.2m of "estate-relevant" assets but only £1.5m in the IHT estate (pension excluded). From April 2027 the full £2.2m enters the estate - triggering RNRB taper that would not have applied before.
Estate planning interactions worth noting
- Charitable bequest 10% rule: If 10% or more of the net estate is left to charity, the IHT rate on the residual estate drops from 40% to 36%. Worth approximately £4,000 per £100,000 of taxable estate.
- Seven-year gift rule: Lifetime gifts above the £3,000/year exemption fall outside the estate if the donor survives 7 years. Taper relief applies between 3-7 years.
- Business Property Relief (BPR): Qualifying business assets receive 100% BPR (50% for some assets). April 2026 reform caps full BPR at first £1m of assets, then 50% for remainder.
- Spousal exemption: Unlimited transfers between UK-domiciled spouses on death - the primary IHT planning tool for married couples.
- Discretionary trusts: 10-yearly + exit charges, but useful for asset class isolation and £325,000 NRB cycling every 7 years for substantial estates.
Quotable findings for media use
- For 2026/27, the standard UK IHT allowance is £325,000 NRB + £175,000 RNRB = £500,000 per individual (£1,000,000 per married couple with combined allowances), all frozen until April 2031.
- The RNRB taper between £2,000,000 and £2,350,000 estate value creates an effective marginal IHT rate of 60% - the highest single tax rate in the UK system.
- From April 2027, defined-contribution pension pots become part of the IHT estate. HMRC's Autumn Budget 2024 policy paper estimates approximately 10,500 additional estates per year drawn into IHT by 2029/30 from the pension inclusion, with around 38,500 estates affected overall by the broader package.
- An estate of £1,000,000 with primary residence + full RNRB + NRB available faces £200,000 IHT for a single person or £0 for a married couple.
- The £325,000 Nil-Rate Band has been frozen since April 2009 - the longest threshold freeze in UK Income Tax / IHT history. CPI indexation would put the NRB at approximately £535,000 in 2026/27.
- The 10% charitable bequest rule reduces the IHT rate from 40% to 36% on the residual estate. Worth approximately £4,000 saved per £100,000 of taxable estate.
Methodology
IHT calculation: estate value - (NRB + effective RNRB) = taxable estate, taxed at 40%. RNRB requires primary residence to pass to direct descendants and tapers above £2,000,000 estate value at £1 per £2.
Married-couple model assumes both NRB and RNRB are transferable from the first-deceased spouse (the standard case where the survivor inherits the entire estate and the deceased used no allowances). Maximum combined allowance = £325,000 × 2 + £175,000 × 2 = £1,000,000.
Source: HMRC IHT manual + gov.uk inheritance tax rates and allowances. Pension inclusion from April 2027 per Autumn Budget 2024 announcement, expanded at Autumn Budget 2025.
Full data provenance + every source URL at salarytax.uk/methodology. Live calculator at /inheritance-tax-calculator.
About this report
Original data report produced by salarytax.uk and republishable in part or whole with attribution to salarytax.uk. Specific calculator + guide permalinks:
- UK Inheritance Tax calculator
- IHT 7-year gift taper calculator
- Married-couple IHT calculator
- Residence Nil-Rate Band calculator
- April 2027 pension IHT deep dive
- BPR + APR April 2026 changes
Companion reports:
Press contact and full quotable assertions at salarytax.uk/press.