Thresholds and rates
The inheritance tax threshold freeze: bands held still until 2031
The tax-free bands have not moved for years and the law now keeps them where they are for the rest of the decade. A rising estate meets a fixed line, and from 2027 the pension joins it.
The nil-rate band of £325,000 and the residence nil-rate band of £175,000 are frozen until 5 April 2031. Section 86 of the Finance Act 2021, as amended three times, by the Finance Act 2023 (section 9), the Finance Act 2025 (section 57) and section 72 of the Finance Act 2026, switches off the usual inflation link for every tax year up to and including 2030/31. The last extension, by one year, was announced at Budget 2025 and became law on 18 March 2026. A frozen band does nothing to an estate that stays the same, but most do not. On the engine, a single parent with a £400,000 home left to the children, £300,000 of savings and a £250,000 pension pays £80,000 on a death today, while the pension is still outside the estate. If everything grows by 3 % a year, an assumption and not a forecast, the same estate at the end of the freeze is worth £1,085,153 with the pension counted from 6 April 2027, and the bill becomes £234,061.
Frozen thresholds: the estate in 2031
Tax in April 2031
£234,061
| Estate then | £1,085,153 |
| Tax today | £180,000 |
| Threshold both years | £500,000 |
Home of £400,000 left to children assumed. The bands do not move until 5 April 2031.
Law read and sums checked by Radif Partners · Editorial policy · How the tax is worked out
The clauses that hold the bands still
Left alone, the Inheritance Tax Act 1984 raises its bands with consumer prices. Parliament has told it not to, and then kept telling it. The instruction is section 86 of the Finance Act 2021, which has since been amended three times, each time to run for longer: by section 9 of the Finance Act 2023, by section 57 of the Finance Act 2025 and by section 72 of the Finance Act 2026. In its present form it disapplies indexation for the tax years up to and including 2030/31, so the nil-rate band stays at £325,000 and the residence band at £175,000 until 5 April 2031.
The latest year was added at Budget 2025. The overview of tax legislation and rates published with it lists the extension, and the Finance Act 2026 received Royal Assent on 18 March 2026, the same Act that brings unused pensions into the estate from 6 April 2027. Both measures therefore arrived together, and the second makes the first bite harder.
Growth against a fixed line
A freeze is a slow tax rise expressed in a different way. Nothing in the rules changes from one year to the next, yet a home that rises in value, savings that earn interest and investments that recover all add to the part of the estate above the threshold. The table below isolates that effect. It takes the single parent of the summary without any pension: a £400,000 home left to two children and £300,000 of savings, with a threshold of £500,000 once the residence band is added. Each row applies a yearly growth rate to both assets for the four and a half years or so between now and the end of the freeze.
| Growth a year | Estate in 2031 | Tax on a death today | Tax at the end of the freeze | Increase |
|---|---|---|---|---|
| No growth | £700,000 | £80,000 | £80,000 | £0 |
| 2 % | £765,242 | £80,000 | £106,097 | £26,097 |
| 3 % | £799,587 | £80,000 | £119,835 | £39,835 |
| 4 % | £835,118 | £80,000 | £134,047 | £54,047 |
The bands are the same in every row. Only the estate moves, and every pound it gains above £500,000 is charged at 40 %. The growth rates are there to show sensitivity: the site does not predict house prices or markets, and none of these figures is a forecast by HMRC or the Treasury. Readers can put their own assumption into the calculator above, which projects an estate to the end of the frozen period.
Adding the pension in April 2027
For this estate the larger change is not the freeze at all. From 6 April 2027, under section 71 of the Finance Act 2026, unused pension funds count in the estate. Put a £250,000 pension back into the same family. On a death today it stays outside, so the tax is the same as without it. A death at the end of the freeze, with the pension grown at the same rate as everything else, brings it in at full value against bands that have not moved.
| Growth a year | Estate in 2031, pension included | Tax on a death today | Tax at the end of the freeze | Of which on the pension |
|---|---|---|---|---|
| No growth | £950,000 | £80,000 | £180,000 | £47,368 |
| 2 % | £1,038,543 | £80,000 | £215,417 | £56,689 |
| 3 % | £1,085,153 | £80,000 | £234,061 | £61,595 |
| 4 % | £1,133,375 | £80,000 | £253,350 | £66,671 |
Read across the first row and the effect of the new rule is clear even with no growth: the estate is bigger by the whole pension, and the tax rises accordingly. Read down the column and the freeze adds a second layer on top. The engine charges the pension its share of the bill at the average rate of the estate, which is why the last column grows faster than the pot itself once the estate is well past the threshold.
Reading the tables against a real estate
The projection is deliberately simple. It applies one growth rate to every asset, which real estates rarely follow: a house can stand still for years while a fund rises, and a pension in drawdown usually shrinks as income is taken from it rather than growing with the market. Spending, care costs and gifts reduce the estate too, and none of them is modelled here. What the tables show is the shape of the problem, that a fixed band turns any growth into taxable value at the full rate, rather than the bill a particular family will face. The calculator at the top of the page uses the same method, so it is most useful when run more than once: with a low rate, a middle one and a high one, and with the pension entered at the value it is likely to have after withdrawals rather than today's figure.
The taper makes a fixed band worse near the top
The residence band taper starts at £2,000,000 of estate, measured after debts and before exemptions, and from 6 April 2027 with the pension included. That trigger has stayed put as well. A widowed parent who has inherited both bands from a late spouse, with a £900,000 home, £500,000 of savings and a £450,000 pension, has an estate of £1,850,000 after April 2027 and keeps the full residence band of £350,000. With 3 % growth a year until 5 April 2031, the estate reaches £2,113,193; the engine takes £56,597 off the residence band and the tax rises from £340,000 to £467,916. In that zone each extra pound of value costs more than the headline rate, because it also removes band.
After 2030/31: what the law says and what it does not
When the frozen period ends, the default rule of the 1984 Act comes back unless Parliament says otherwise: the bands would be uprated in line with the consumer prices index, starting with the figure for September 2030. That is a description of the statute as it stands, not a promise. The freeze has been lengthened more than once, most recently by the Act of 18 March 2026, and a future Finance Act could lengthen it again, change the bands or leave them alone. No figure for the bands after 5 April 2031 has been announced, and this site does not estimate one.
For planning purposes most people simply look at the estate against the bands that are certain, those published on GOV.UK, and treat anything later as unknown. The threshold guide explains how the two bands combine and when the residence band is lost; the pension guide covers what section 150A adds to the estate.
What families tend to look at
The freeze itself cannot be planned around, since it applies to everyone. What some families look at instead is the size of the estate it is measured against: gifts made during life and the 7-year clock that goes with them, legacies to charity that can lower the rate, the order in which pension and other savings are drawn, and whether a pension nomination goes to a spouse or civil partner, whose share is exempt. None of these is right for everybody, and some interact badly with income tax or with the residence band. The estate calculator shows the effect of each on one set of figures, and the representatives of an estate, a solicitor or a regulated financial adviser are the people who look at a real plan.