UK inheritance tax is being reshaped by three main reforms between 2024 and 2027: the tax-free thresholds are frozen until April 2031, agricultural and business property relief is being capped from April 2026, and most unused pensions come inside the estate for inheritance tax from April 2027. The headline 40% rate and the core tax-free bands (a £325,000 nil-rate band and up to £175,000 residence nil-rate band) stay the same in cash terms.
The practical effect is that more estates are expected to face a bill over time, even though the published rates and allowances look unchanged. This guide sets out each reform, its start date and its primary source, so the picture is easy to follow. Figures are current as at August 2026 and are subject to change. It covers the law of England and Wales, with points for Scotland and Northern Ireland flagged where they matter.
The reforms at a glance
Four dates matter most. The table below summarises the changes and when they take effect.
| Change | Takes effect | What it means |
|---|---|---|
| Pensions announced for inheritance tax | Announced Autumn Budget 2024; applies from 6 April 2027 | Most unused pension funds and death benefits will count as part of the estate. |
| Agricultural and business relief cap | From 6 April 2026 | 100% relief on the first £2,500,000 of qualifying property, then 50% above. |
| £2.5m relief allowance confirmed | Announced 23 December 2025 | Replaced the £1,000,000 figure first proposed, and made the allowance transferable. |
| Threshold freeze extended | Confirmed Budget 2025 (26 November 2025) | Bands frozen a further year, to the end of the 2030-31 tax year. |
Sources: gov.uk, pensions and inheritance tax; gov.uk, relief threshold; gov.uk, inheritance tax thresholds (Budget 2025). As at August 2026, subject to change.
The frozen thresholds and the extended freeze
The nil-rate band (£325,000) and the residence nil-rate band (up to £175,000) are the amounts that can pass free of inheritance tax before the 40% rate applies. Both were already frozen (gov.uk, nil-rate band and residence nil-rate band thresholds, as at August 2026, subject to change), and Budget 2025 on 26 November 2025 extended that freeze by a further year, so the bands and the £2,000,000 taper threshold now hold at today's levels until the end of the 2030-31 tax year, which is 5 April 2031 (gov.uk, inheritance tax thresholds, Budget 2025, 26 November 2025, as at August 2026, subject to change).
Because the cash figures stand still while many estate values rise, the frozen bands can quietly pull more estates over the line, an effect often called fiscal drag. The residence nil-rate band also tapers away for larger estates: it is reduced by £1 for every £2 by which the estate exceeds £2,000,000, so an estate above roughly £2.35 million (for a single person) can lose the residence band altogether (gov.uk/inheritance-tax, as at August 2026, subject to change). Combining both partners' bands, a married couple or civil partners leaving a home to direct descendants may pass on up to £1,000,000 before inheritance tax, while a single person leaving a home to children may reach up to £500,000. Reading our guide to inheritance tax alongside this page gives the fuller picture of how the bands work.
Agricultural and business property relief from April 2026
This is the reform that changed most between its first and final form. Agricultural property relief (APR) and business property relief (BPR) let qualifying farmland and trading businesses pass with valuable relief from inheritance tax. From 6 April 2026, 100% relief applies only to the first £2,500,000 of combined qualifying agricultural and business property per person, with 50% relief on value above that (gov.uk, relief threshold, as at August 2026, subject to change).
The £2,500,000 allowance was announced on 23 December 2025 and replaced the £1,000,000 figure set out at Autumn Budget 2024. Importantly, the final allowance is transferable between spouses and civil partners, so a couple may pass on up to £5,000,000 of qualifying agricultural or business property between them before this cap bites, on top of the ordinary nil-rate bands (gov.uk, agricultural relief guidance, as at August 2026, subject to change). Value above the allowance attracts 50% relief, which works out at an effective rate of up to 20% rather than the standard 40%. Any earlier commentary quoting a flat £1,000,000 allowance or describing it as non-transferable predates the 23 December 2025 announcement.
Pensions inside inheritance tax from April 2027
Announced at Autumn Budget 2024, this change brings most unused pension funds and pension death benefits within the value of the estate for inheritance tax from 6 April 2027 (gov.uk, unused pension funds and death benefits, as at August 2026, subject to change). Until then, many pension pots can pass outside the estate, which is why pensions have often featured in longer-term planning.
From that date, the personal representatives administering an estate will generally be responsible for reporting and paying any inheritance tax due on pension wealth, alongside the rest of the estate. Some payments, such as death in service benefits from a registered scheme, are set to remain outside scope. This is an announced future change rather than current law, so the detail can still move before it starts.
What has not changed
Several core rules carry through the reform period unchanged in cash terms. It helps to see them next to the reforms above.
| Feature | Position (as at August 2026) |
|---|---|
| Standard inheritance tax rate | 40% on the taxable estate |
| Reduced charity rate | 36% where 10% or more of the net estate passes to charity |
| Nil-rate band | £325,000 |
| Residence nil-rate band | Up to £175,000 |
| Annual gift exemption | £3,000 per tax year |
| Small gifts exemption | £250 per person |
| 7-year rule on gifts | Unchanged, with taper relief on the tax for gifts 3 to 7 years before death |
Source: gov.uk/inheritance-tax and gov.uk, gifts, as at August 2026, subject to change.
The gift rules are worth a note, because they are often misread. If a gift is made more than seven years before death it usually falls outside the estate. Taper relief can reduce the tax on gifts made 3 to 7 years before death, but it reduces the tax on the gift, not the value of the gift itself, and it only applies where the total gifts exceed the nil-rate band (gov.uk, gifts and the 7-year rule, as at August 2026, subject to change). None of the 2024 to 2027 reforms alter that framework. Where pensions have formed part of a plan, the 2027 change may be a prompt to review how a will and any lifetime gifts fit together, and to check that a lasting power of attorney is in place for decisions during life.
Scotland and Northern Ireland
Inheritance tax is a UK-wide tax, so the reforms on this page apply across Scotland, England, Wales and Northern Ireland in the same way. What differs is the surrounding law. Scotland has its own succession rules, including legal rights that can entitle a spouse and children to a fixed share of an estate, and it uses confirmation rather than a grant of probate. Northern Ireland has a separate but broadly similar system to England and Wales. Where an estate touches more than one jurisdiction, it can be worth taking advice in each.
- Standard rate 40%; reduced rate 36% where 10%+ of the net estate passes to charity (gov.uk).
- Nil-rate band £325,000 and residence nil-rate band up to £175,000 (gov.uk), frozen with the £2,000,000 taper threshold until 5 April 2031 as confirmed at Budget 2025 (gov.uk).
- From 6 April 2026, APR and BPR give 100% relief on the first £2,500,000 of qualifying property per person, then 50%, transferable up to £5,000,000 per couple (gov.uk).
- From 6 April 2027, most unused pension funds and death benefits count towards the estate (gov.uk).
- Registering a lasting power of attorney costs £92 per LPA with the Office of the Public Guardian (gov.uk).
Frequently asked questions
What are the main UK inheritance tax reforms for 2024 to 2027?
There are three. The nil-rate band, residence nil-rate band and £2,000,000 taper threshold are frozen until 5 April 2031; from 6 April 2026 agricultural and business property relief is capped at 100% on the first £2,500,000 per person then 50% above; and from 6 April 2027 most unused pensions count towards the estate. Figures are as at August 2026 and subject to change (gov.uk).
Are inheritance tax thresholds changing?
Not in cash terms. The nil-rate band stays at £325,000 and the residence nil-rate band at up to £175,000 (gov.uk), both frozen along with the £2,000,000 taper threshold until the end of the 2030-31 tax year (5 April 2031), as confirmed at Budget 2025 on 26 November 2025 (gov.uk). Because values often rise while the bands hold still, more estates can become liable over time. As at August 2026, subject to change.
How did the 2026 farm and business relief change from the first proposal?
The 100% relief allowance was announced at £1,000,000 and not transferable at Autumn Budget 2024, then revised on 23 December 2025 to £2,500,000 per person and made transferable between spouses and civil partners, up to £5,000,000 per couple. Value above the allowance gets 50% relief. It applies from 6 April 2026. As at August 2026, subject to change (gov.uk).
Will pensions be subject to inheritance tax from 2027?
Most unused pension funds and death benefits are due to be brought within the value of the estate for inheritance tax from 6 April 2027, as announced at Autumn Budget 2024. Some benefits, such as death in service payments from a registered scheme, are set to stay outside scope. This is an announced future change, so the detail may still alter. As at August 2026, subject to change (gov.uk).
Has the 40% inheritance tax rate changed?
No. The standard rate remains 40% on the part of an estate above the available tax-free thresholds, and a reduced 36% rate still applies where 10% or more of the net estate passes to charity. As at August 2026, subject to change (gov.uk).
Do the reforms change the 7-year gift rule?
No. The 7-year rule for potentially exempt transfers, the £3,000 annual exemption and the £250 small gifts exemption are unchanged. Taper relief still reduces the tax on gifts made 3 to 7 years before death, rather than the value of the gift, and only where total gifts exceed the nil-rate band. As at August 2026, subject to change (gov.uk).