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Inheritance Tax

Rachel Reeves and Inheritance Tax: What Has Changed

A factual, non-partisan summary of the inheritance tax changes announced under the current UK government, with each figure checked on gov.uk.

8 min read · Written by the Fairchild Oldfield team · Last reviewed: July 2026

£325,000
The nil-rate band, now fixed at this level until the end of the 2030-31 tax year (5 April 2031) rather than rising with inflation, which may draw more estates towards inheritance tax over time.
Source: gov.uk, as at July 2026, subject to change.

Rachel Reeves is the current Chancellor of the Exchequer, and several inheritance tax measures have been announced or introduced during this Parliament. This guide reports those measures as policy, checked against gov.uk, and does not comment on the politics.

Inheritance tax is a UK-wide tax on the estate of someone who has died, charged only on the part of an estate above the available tax-free thresholds, with a standard rate of 40% (gov.uk, as at July 2026, subject to change). The changes below affect the thresholds, pensions, and reliefs for farms and businesses. Forward-dated measures are marked as announced or subject to legislation. This note forms part of our wider guide to inheritance tax changes for 2027. Figures are current as at July 2026 and are subject to change.

What has changed under the current government?

Three main areas stand out. The nil-rate bands have been fixed for longer, most unused pension funds are set to fall within inheritance tax from April 2027, and the reliefs for agricultural and business property are being reshaped from April 2026. The standard 40% rate itself is unchanged (gov.uk, as at July 2026, subject to change). Each item is set out below.

The changes at a glance

The table below lists each measure with its effective date and source. Forward-dated items are marked, and dates and figures may change as legislation is finalised.

ChangeWhat it meansEffective dateSource (as at July 2026)
Nil-rate band frozen Held at £325,000 rather than rising with inflation Fixed to end of 2030-31 gov.uk
Residence nil-rate band frozen Held at up to £175,000, taper threshold £2,000,000 Fixed to end of 2030-31 gov.uk
Pensions within inheritance tax Most unused pension funds and death benefits counted in the estate Deaths on or after 6 April 2027 gov.uk
APR and BPR reform (announced, subject to legislation) 100% relief on the first £2,500,000 of qualifying property, 50% above, allowance transferable between spouses From 6 April 2026 gov.uk
Standard rate Unchanged at 40%, or 36% where 10%+ of the net estate passes to charity In force gov.uk

Sources as listed, gov.uk, as at July 2026 and subject to change. Forward-dated reliefs remain subject to legislation.

The thresholds

Frozen nil-rate bands

The nil-rate band stays at £325,000 and the residence nil-rate band at up to £175,000, with the £2,000,000 taper threshold unchanged. Rather than rising each year, these are now fixed for the tax years 2028 to 2029 and 2030-31, so the freeze runs to the end of the 2030-31 tax year (5 April 2031) (gov.uk, as at July 2026, subject to change). This freeze was extended by a further year at Budget 2025 (26 November 2025), having previously been set to end at the close of the 2029-30 tax year.

Because the bands are held while many estate values rise, a larger number of estates may be drawn towards inheritance tax over the period. For how the bands combine for couples, see our note on IHT thresholds and allowances.

Source: gov.uk, nil-rate bands from 6 April 2028, as at July 2026, subject to change.

Fixed until

2030–31

The nil-rate band and residence nil-rate band are fixed to the end of the 2030-31 tax year (5 April 2031), according to gov.uk as at July 2026, subject to change.

Pensions expected within inheritance tax from 2027

Most unused pension funds and death benefits are set to be counted within the value of a person's estate for inheritance tax. This was announced by the government and legislated in the Finance Act 2026, taking effect for deaths on or after 6 April 2027 (gov.uk, as at July 2026, subject to change). As a forward-dated measure, the detail may still be refined.

What sits inside and outside. The measure is expected to bring most unused pension funds and death benefits into the estate, with personal representatives responsible for reporting and paying any tax due. Some benefits, such as certain death-in-service payments from a registered scheme, are described as outside its scope (gov.uk, as at July 2026, subject to change). Because the rules take effect from 6 April 2027 and turn on individual circumstances, this is general information rather than advice on any particular pension.

Agricultural and business property relief reform

The reliefs for farms and trading businesses are being reshaped. As announced, and subject to legislation, from 6 April 2026 a 100% rate of relief would apply to the first £2,500,000 of combined qualifying agricultural and business property in an estate, with relief of 50% on value above that level. The allowance would be transferable between spouses and civil partners (gov.uk, as at July 2026, subject to change).

The government has said the change is to be introduced through the Finance Bill, so the figures and timing remain subject to legislation and could alter before they take effect (gov.uk, as at July 2026, subject to change). This measure mainly affects estates holding farmland or trading businesses rather than typical family estates.

The rate

The 40% rate is unchanged

The headline rate of inheritance tax has not moved. It remains 40%, charged only on the part of an estate above the available tax-free bands, and a reduced rate of 36% can apply where at least 10% of the net estate passes to charity (gov.uk, as at July 2026, subject to change). Many estates fall within the bands and pay nothing.

See our fuller guide, Inheritance Tax Explained, for how the rate and the bands work together.

Standard rate

40%

Charged only above the available bands, with a reduced 36% where 10% or more of the net estate goes to charity, per gov.uk as at July 2026, subject to change.

What these changes may mean for families

Taken together, frozen bands, pensions coming into scope, and reshaped reliefs may bring more estates within inheritance tax over time, though the effect depends entirely on individual circumstances. Because two of the measures are forward-dated and one remains subject to legislation, plans made now are often kept under review. For general options, see how to reduce inheritance tax.

Policy sets the framework. How, or whether, any of it touches a particular estate depends on its size, its assets and who inherits.

Frequently asked questions

What inheritance tax changes has Rachel Reeves announced?

The main measures are a longer freeze on the nil-rate band at £325,000 and residence nil-rate band at up to £175,000, most unused pension funds falling within inheritance tax, and a reshaped relief for agricultural and business property (gov.uk, as at July 2026, subject to change). The standard 40% rate is unchanged, and forward-dated items remain subject to legislation.

Has the inheritance tax rate changed?

No. The standard rate remains 40%, charged only on the part of an estate above the available tax-free bands, with a reduced rate of 36% where at least 10% of the net estate passes to charity (gov.uk, as at July 2026, subject to change). The recent measures affect thresholds, pensions and reliefs rather than the rate itself.

When will pensions be subject to inheritance tax?

Most unused pension funds and death benefits are set to be counted within the estate for deaths on or after 6 April 2027, as legislated in the Finance Act 2026 (gov.uk, as at July 2026, subject to change). As a forward-dated measure the detail may still be refined, so this is general information only.

What is the agricultural and business property relief change?

As announced and subject to legislation, from 6 April 2026 a 100% rate of relief would apply to the first £2,500,000 of combined qualifying agricultural and business property, with 50% relief above that, and the allowance would be transferable between spouses (gov.uk, as at July 2026, subject to change). It mainly affects farms and trading businesses.

Are the nil-rate bands still frozen?

Yes. The nil-rate band stays at £325,000 and the residence nil-rate band at up to £175,000, now fixed to the end of the 2030-31 tax year (5 April 2031) rather than rising with inflation (gov.uk, as at July 2026, subject to change). Because values can rise while bands are held, more estates may be affected over time.

Do these changes apply across the whole UK?

Inheritance tax is a UK-wide tax, so the bands, the 40% rate and these measures apply across England, Wales, Scotland and Northern Ireland (gov.uk, as at July 2026, subject to change). The surrounding succession law differs between the nations, so where an estate touches more than one, it can be worth taking advice in each.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice, and it does not comment on any political party or figure. Reading it does not create a professional relationship. Inheritance tax applies across the UK, though the surrounding law in each nation may differ. Figures and rules are current as at July 2026 and are subject to change, and forward-dated measures remain subject to legislation. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

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