What is the inheritance tax threshold for 2026/27?

The standard Inheritance Tax nil-rate band is £325,000 for 2026/27. This means the first £325,000 of your estate is taxed at 0%. Anything above this is taxed at 40%. If you leave your main residence to direct descendants (children, grandchildren), you also get the residence nil-rate band of £175,000, giving a combined tax-free threshold of £500,000. For married couples, unused allowances can be transferred, giving a potential combined threshold of £1,000,000.

What is the 7-year rule for inheritance tax gifts?

Gifts made more than 7 years before death are completely exempt from Inheritance Tax (called potentially exempt transfers or PETs). Gifts made within 7 years are taxed on a sliding scale: 3 years before death = 40% tax, 3-4 years = 32%, 4-5 years = 24%, 5-6 years = 16%, 6-7 years = 8%, and 7+ years = 0%. This is called taper relief. Gifts of any amount to your spouse or civil partner are always exempt regardless of timing. Gifts to charities are also exempt.

What gifts are exempt from inheritance tax?

Several gifts are automatically exempt from IHT regardless of timing: annual exemption of £3,000 per year (can carry forward 1 year), small gifts of up to £250 per person per year, wedding gifts (£5,000 to children, £2,500 to grandchildren, £1,000 to others), regular gifts from surplus income (must not reduce your standard of living), gifts to UK charities and political parties, and gifts between spouses/civil partners. These exemptions can be combined to significantly reduce your estate over time.

How does the residence nil-rate band work?

The residence nil-rate band (RNRB) is an additional £175,000 allowance on top of the standard £325,000 nil-rate band. It applies when you leave your main residence to direct descendants (children, step-children, grandchildren, great-grandchildren). This gives a total tax-free threshold of £500,000 per person. The RNRB is tapered by £1 for every £2 that your estate exceeds £2,000,000, meaning very large estates lose this allowance. For married couples, both allowances can be combined and any unused allowance from the first spouse transfers to the surviving spouse.

How can I reduce my inheritance tax bill?

Strategies to reduce IHT include: making regular gifts from surplus income, using your £3,000 annual exemption, giving wedding gifts, making potentially exempt transfers (gifts more than 7 years before death), leaving 10% or more of your estate to charity (reduces IHT rate from 40% to 36%), putting assets into trust (with professional advice), taking out a whole-of-life insurance policy written in trust to cover the IHT bill, and making pension contributions (pensions are usually outside your estate for IHT purposes). Professional financial advice is strongly recommended for estates above the nil-rate band.

Do spouses pay inheritance tax when one dies?

No. All assets passed to a surviving spouse or civil partner are completely exempt from Inheritance Tax, regardless of the amount. This is called the spouse exemption. Additionally, any unused nil-rate band (£325,000) and residence nil-rate band (£175,000) from the first spouse transfers to the surviving spouse. This means a surviving spouse can have up to £1,000,000 of combined allowances (£325k + £325k + £175k + £175k) before any IHT is due. The unused allowance is claimed by the executors when the second spouse dies.

UK Tax Brackets 2026/27

A clear breakdown of UK Income Tax bands and rates for 2026/27 — how much of your income is tax-free, and what rate applies to the rest.

Table of Contents Income Tax bands & rates Personal Allowance The £100k Personal Allowance taper Scotland's different bands Income Tax vs National Insurance Frequently Asked Questions

Income Tax bands & rates for 2026/27

These bands apply to taxpayers in England, Wales and Northern Ireland. Scotland has its own bands (see below).

Band	Taxable income	Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

Want your exact figure? Use the Take-Home Pay Calculator to see your tax band, National Insurance and net pay in one go.

Personal Allowance

Everyone gets a £12,570 tax-free Personal Allowance in 2026/27, unless they earn over £100,000 (see the taper below) or have chosen to transfer some of it via Marriage Allowance. Income above your Personal Allowance is taxed according to the bands in the table above.

The £100k Personal Allowance taper

For every £2 you earn above £100,000, you lose £1 of your Personal Allowance. This creates an effective marginal tax rate of around 60% on income between £100,000 and £125,140, since you're paying 40% Higher Rate tax while simultaneously losing tax-free allowance. By £125,140, the Personal Allowance is reduced to £0.

Scotland's different bands

Scotland sets its own Income Tax rates and bands for Scottish taxpayers, with more tiers than the rest of the UK: Starter Rate, Basic Rate, Intermediate Rate, Higher Rate, Advanced Rate and Top Rate. Rates are generally higher than the rest of the UK at higher income levels. The Personal Allowance and National Insurance remain the same across the whole UK.

Income Tax vs National Insurance

Tax brackets only cover Income Tax. Most employees also pay Class 1 National Insurance on earnings above the Primary Threshold, which is separate from and in addition to Income Tax. See our National Insurance Calculator for current NI rates.

Frequently Asked Questions

What are the UK tax brackets for 2026/27?

For 2026/27 (England, Wales and Northern Ireland): 0% on the first £12,570 (Personal Allowance), 20% Basic Rate from £12,571 to £50,270, 40% Higher Rate from £50,271 to £125,140, and 45% Additional Rate above £125,140. Scotland has its own bands with more tiers.

What is the UK tax-free allowance for 2026/27?

The standard Personal Allowance is £12,570 for 2026/27 — the amount you can earn before paying any Income Tax. It reduces by £1 for every £2 earned above £100,000, and is fully gone once income reaches £125,140.

What tax band am I in UK?

Your tax band depends on your total taxable income after the Personal Allowance. Income between £12,571 and £50,270 falls in the Basic Rate (20%) band, £50,271 to £125,140 in the Higher Rate (40%) band, and anything above £125,140 in the Additional Rate (45%) band. Use our Take-Home Pay Calculator to see your exact band and tax.

Are tax brackets different in Scotland?

Yes. Scotland sets its own Income Tax rates and bands for Scottish taxpayers, with more bands than the rest of the UK (Starter, Basic, Intermediate, Higher, Advanced and Top rates), and generally higher rates at higher income levels. National Insurance and the Personal Allowance remain the same UK-wide.

Why is my tax rate 60% between £100,000 and £125,140?

This is the effective tax rate created by the Personal Allowance taper. For every £2 you earn above £100,000, you lose £1 of your £12,570 Personal Allowance, so that slice of income is taxed at 40% plus loses tax-free allowance worth an extra 20%, giving an effective marginal rate of around 60% until the Allowance is fully gone at £125,140.

Sources & Methodology

Figures based on HMRC published Income Tax rates and thresholds for 2026/27. Scottish rates set by the Scottish Government / Revenue Scotland. This guide is for general information only and does not constitute financial advice — consult a qualified accountant or tax adviser for your personal circumstances.