Entity Setup
Inheritance Tax Thresholds Fixed Until 2031: Implications for Estates & Succession
The UK has extended the freeze on inheritance tax nil-rate and residence bands until 5 April 2031—learn who it impacts, and how to plan proactively under this fixed threshold regime.
By NomadicTax Research Team • 5-8 min read • April 7, 2026
## What Has Been Confirmed?
- The **nil-rate band (NRB)** remains at **£325,000** per individual. ([gov.uk](https://www.gov.uk/government/publications/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2026/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2026-to-5-april-2028?utm_source=openai))
- The **residence nil-rate band (RNRB)** remains at **£175,000**.
- The **taper threshold**, the estate value above which the RNRB begins to phase out, remains fixed at **£2 million**.
These fixed thresholds, previously confirmed through 2029-30, are now extended for an **additional one year**—i.e. **until 5 April 2031**. ([gov.uk](https://www.gov.uk/government/publications/hm-revenue-and-customs-trusts-and-estates-newsletters/hmrc-trusts-and-estates-newsletter-february-2026?utm_source=openai))
## Who Is Most Affected?
- Estates with values **close to or above £500,000**, where RNRB and NRB usage matters greatly.
- Families planning successions, especially with property or high-value estates.
- Those who previously assumed these bands would increase with inflation—expectation management required.
## Examples of Estate Impacts
- **Estate valued at £400,000**, includes main residence passing to children: below taper threshold—both NRB and full RNRB apply, leaving £100,000 taxable (i.e. £400,000 − £325,000 − £175,000 = £0 taxable). Actually over-relieved; in this case no IHT.
- **Estate valued at £2.5 million**: In this case, the £2 million taper threshold means RNRB reduces by £1 for every £2 over this threshold. Value over threshold = £500,000 ⇒ RNRB reduces by £250,000, leaving £175,000 − £250,000 = nil RNRB. Only NRB applies and remainder taxed.
## Planning Steps & Mitigation
- **Gift early**: Lifetime gifts (possibly exempt transfers) can reduce estate value if done well ahead of death.
- **Use trusts carefully**: Trusts may help but can invoke charges themselves—seek professional advice.
- **Review property ownership and transfers**: Joint ownership, spousal exemptions remain useful.
- **Consider trusts or life assurance** to cover anticipated IHT liabilities for large estates.
## Strategic Implications
- The **freeze on thresholds**, combined with inflation, effectively increases IHT for many estates—smaller or “middle wealth” estates will feel squeezed.
- Tax planning becomes more important now—decisions about transfers, gifting, property ownership, wills must consider fixed IHT bands.
- For digital nomads or those considering non-UK domicile, must assess where IHT applies and whether estate-planning in multiple jurisdictions needed.
**Category**: Entity Setup
**Tax Home**: UK
**Author**: NomadicTax Research Team
**ReadTime**: 6 min
**Published**: true