IHT400 Rates and Thresholds for 2026: The Numbers That Drive Every Box
When you fill in form IHT400, almost every figure you enter is steered by five numbers: the 40% standard rate, the 36% reduced rate for charitable estates, the £325,000 nil-rate band, the £175,000 residence nil-rate band, and the £2 million taper threshold. Get those right and the calculation pages of IHT400 fall into place. This guide walks through each one with the boxes it touches, a fully worked taper example, and the late-payment interest rate HMRC will add if the tax isn't paid in time.
The two rates that actually charge tax
IHT400 is the full inheritance tax account — the long form you complete when an estate is over the excepted-estate limits and tax may be due. The tax it calculates is charged at only two possible rates.
40% — the standard rate. Inheritance tax is charged at 40% on the value of an estate above the available threshold. It is not 40% of the whole estate — only the slice that exceeds the nil-rate band(s). This is the rate that flows through the calculation on form IHT400 (and the supplementary calculation in IHT400 itself or the standalone IHT400 Calculation page) for the great majority of taxable estates. GOV.UK confirms the standard rate is 40%.
36% — the reduced charity rate. Where the deceased left at least 10% of the net estate (the "baseline amount" after deducting the nil-rate band, reliefs and exemptions) to qualifying charities, the rate on the chargeable estate drops from 40% to 36%. On IHT400 you work this out using the supplementary form IHT430, which carries the reduced-rate election and the charitable-giving figures across to the main calculation. GOV.UK sets out the reduced 36% rate here.
The 10% test is calculated on the net estate after the nil-rate band, so the maths can surprise families. In some estates, giving a little more to charity to clear the 10% hurdle actually leaves the beneficiaries with more in their pockets than giving less, because the whole taxable estate then qualifies for the lower 36% rate. Always run both versions before finalising IHT430.
The two thresholds — and why they're frozen
£325,000 — the nil-rate band (NRB)
Everyone gets a basic £325,000 nil-rate band. Estate value below it isn't taxed; value above it is exposed to the 40% (or 36%) rate. On IHT400 the nil-rate band is brought in on the calculation, after you've totalled the estate on the various asset schedules (IHT405 for land and buildings, IHT406 for bank accounts, IHT407 for household goods, and so on). The £325,000 figure has been fixed since 6 April 2009. GOV.UK's thresholds table shows the £325,000 NRB running from 6 April 2009 through to 5 April 2031.
£175,000 — the residence nil-rate band (RNRB)
On top of the NRB, an additional £175,000 residence nil-rate band is available when a home (or the proceeds of one) is left to direct descendants — children, grandchildren, step, adopted and foster children all count. Claim it on IHT400 using supplementary form IHT435 (and IHT436 if you're also claiming a deceased spouse's unused RNRB). Stack the NRB and RNRB and a single homeowner leaving the house to the children can pass on up to £500,000 tax-free; a married couple or civil partnership can reach up to £1 million combined, because unused allowances transfer to the survivor. GOV.UK explains the RNRB and the £2m taper here.
Both bands are frozen. At the Autumn Budget on 26 November 2025 the freeze was extended by a further year: the £325,000 NRB and £175,000 RNRB are now held at today's levels until 5 April 2031 (previously April 2030). That is the figure shown on the current GOV.UK thresholds table. If your planning notes still say "until April 2030," update them.
| Number | Value | What it does on IHT400 | Status |
|---|---|---|---|
| Standard rate | 40% | Charged on estate value above the threshold | Unchanged |
| Charity rate | 36% | Applies if ≥10% of net estate left to charity (via IHT430) | Unchanged |
| Nil-rate band (NRB) | £325,000 | Tax-free band brought into the calculation | Frozen to 5 Apr 2031 |
| Residence NRB (RNRB) | £175,000 | Extra band for a home to descendants (IHT435) | Frozen to 5 Apr 2031 |
| RNRB taper threshold | £2,000,000 | RNRB reduces by £1 for every £2 above this | Frozen to 5 Apr 2031 |
| HMRC late-pay interest | 7.75% | Added to unpaid tax from month 7 (from 9 Jan 2026) | Base rate + 4% |
The £2 million taper — worked through, box by box
This is the rule people get wrong on IHT400. The residence nil-rate band is not guaranteed at £175,000. Once the net estate is worth more than £2 million, the RNRB is withdrawn at the rate of £1 for every £2 over the threshold. So a large estate can lose part — or all — of its RNRB, which quietly increases the taxable slice.
Estate of Margaret Whitcombe, widow, Yorkshire. Margaret dies in May 2026 leaving everything — including her home — to her two adult children. Her net estate (after debts and funeral costs) is £2,300,000. She has the full £325,000 NRB and qualifies for the £175,000 RNRB because a home passes to her children.
Step 1 — Find how far over the £2m taper threshold she is.
£2,300,000 − £2,000,000 = £300,000 over the threshold.
Step 2 — Reduce the RNRB by £1 for every £2 over.
£300,000 ÷ 2 = £150,000 of RNRB lost.
Available RNRB = £175,000 − £150,000 = £25,000 (entered on form IHT435).
Step 3 — Total the available threshold.
£325,000 (NRB) + £25,000 (tapered RNRB) = £350,000 tax-free.
Step 4 — Apply the 40% rate to the taxable estate.
£2,300,000 − £350,000 = £1,950,000 chargeable.
£1,950,000 × 40% = £780,000 inheritance tax due.
The cost of the taper: if the RNRB had survived in full (£175,000), the threshold would have been £500,000 and the tax £720,000. The £150,000 of lost RNRB added £60,000 to Margaret's bill — exactly 40% of the tapered-away band. That is the figure the taper costs, and it all flows from the £2m line on IHT435.
If Margaret's estate had reached £2,350,000 or more, the full £175,000 RNRB would have tapered to zero (£350,000 ÷ 2 = £175,000), and IHT435 would simply show no available residence band. Above that point, estate planning to bring the net estate under £2 million — through lifetime giving, qualifying business or agricultural assets, or charitable legacies — is often where the real saving lies.
The interest rate that catches estates out
Inheritance tax on the estate is generally due by the end of the sixth month after the person died. Miss that deadline and HMRC charges interest on the unpaid tax from that point until it's paid. As of 9 January 2026, the late-payment interest rate is 7.75% — set by formula at the Bank of England base rate plus 4 percentage points (the margin rose from base + 2.5% to base + 4% on 6 April 2025). Interest HMRC pays on overpaid tax (repayment interest) is lower, at 2.75%. GOV.UK publishes the current IHT interest rate here.
On IHT400 itself there is no "interest box" you fill in to calculate this — HMRC works out interest separately and adds it to what's owed. Where it bites is on estates that opt to pay tax on land and certain assets by the 10-year instalment option: instalments after the first generally carry interest, and any instalment paid late accrues it too. At 7.75%, a six-figure tax bill left unpaid for a year quietly grows by thousands. The practical fix is the same one practitioners have always used — pay what you can on time, even before probate is granted, using the Direct Payment Scheme (which lets banks release funds straight to HMRC) to stop the interest clock.
Interest is automatic and unavoidable on late tax — it's the price of the money, not a punishment. Penalties are separate and apply to late filing of IHT400 or to inaccurate accounts. You can owe interest without a penalty, and you can be penalised even where little tax was due. Treat them as two different risks when you plan the timetable.
Why frozen thresholds put more estates on IHT400
The quiet story behind the 2026 numbers is what the freeze does. The NRB has sat at £325,000 since 2009 and the RNRB at £175,000 since 2020 — and both are now locked until April 2031. Meanwhile house prices and savings have risen. Each year the bands stand still while estates grow, more families cross the line into "taxable," and more are pushed past the excepted-estate limits that decide whether you can use the shorter IHT205/IHT400C route or must complete the full IHT400.
This is "fiscal drag": the rate never changes, but the number of estates caught by it climbs. HMRC's own forecasts and independent analysis both point the same way — the share of deaths resulting in an inheritance tax charge is rising through the late 2020s precisely because the thresholds are frozen. For executors, the practical effect is simple: an estate that would have escaped IHT400 a decade ago at the same real value may now need the full account. If an estate is near £325,000 (or near £500,000 with a home to children), don't assume the excepted-estate rules apply — check the current limits before reaching for the shorter forms.
- Two rates only: 40% standard, or 36% where ≥10% of the net estate goes to charity (claimed via IHT430).
- £325,000 NRB + £175,000 RNRB are both frozen until 5 April 2031 — the Autumn 2025 Budget extended the freeze a year beyond the old 2030 date.
- The £2m taper strips £1 of RNRB for every £2 of net estate above £2 million; it's gone entirely by about £2.35m. Each £2 lost adds roughly £0.40 of tax (40% of £1).
- Late tax accrues 7.75% interest (base rate + 4%, from 9 January 2026), added by HMRC outside the IHT400 boxes; pay early via the Direct Payment Scheme to stop it.
- Frozen bands = fiscal drag: more estates each year are dragged over the threshold and onto the full IHT400. Re-check the excepted-estate limits for borderline estates.
- Always verify before submitting against the current GOV.UK thresholds page — rates and the interest figure change with the base rate.
What rate of inheritance tax does IHT400 calculate — 40% or 36%?
Both are possible. The standard rate is 40% on estate value above the available threshold. If the deceased left at least 10% of the net estate to charity, the chargeable estate qualifies for the reduced 36% rate, claimed using supplementary form IHT430. Per GOV.UK.
What are the nil-rate band and residence nil-rate band for 2026?
The nil-rate band is £325,000 and the residence nil-rate band is £175,000. Combined, a single homeowner leaving a home to direct descendants can pass on up to £500,000; a couple up to £1 million. Both bands are frozen until 5 April 2031, per the GOV.UK thresholds table.
How does the £2 million taper reduce the RNRB on IHT400?
If the net estate exceeds £2 million, the £175,000 RNRB is reduced by £1 for every £2 above the threshold. An estate £300,000 over the limit loses £150,000 of RNRB, leaving only £25,000 (entered on form IHT435). By around £2.35 million the RNRB tapers to nil. See the example on GOV.UK.
What interest does HMRC charge on late inheritance tax, and where does it appear?
As of 9 January 2026 the late-payment rate is 7.75% (Bank of England base rate plus 4%); repayment interest is 2.75%. It isn't a box you complete on IHT400 — HMRC calculates it separately on tax unpaid after the six-month deadline and adds it to the bill. See the GOV.UK rates page.
Do the frozen thresholds mean more people have to file IHT400?
Yes. Because the £325,000 and £175,000 bands have been frozen while estate values rise, more estates each year cross the threshold and pass the excepted-estate limits, which means the full IHT400 account is needed rather than the shorter route. This "fiscal drag" raises the number of taxable estates without changing the headline 40% rate.
Has the threshold freeze really been extended to 2031?
Yes. The freeze had run to April 2030, but at the Autumn Budget on 26 November 2025 it was extended by a further year to 5 April 2031. The current GOV.UK thresholds table shows the £325,000 band running to 5 April 2031.
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