Inheritance tax after Budget 2026: what stayed the same
No change to the main rules
Budget 2026 left the inheritance tax allowances, rates and gift rules exactly as they were.
There were rumours before 28 October of bigger changes, including a flat rate on all estates. None of them happened. The main change still coming is pensions counting from April 2027, which was already law.
The Budget also left the spouse and civil partner exemption alone, so anything you leave to your husband, wife or civil partner remains free of inheritance tax. And there was no change to capital gains tax on death: your family still inherits assets at their value on the day you die.
The figures for 2026/27 and 2027/28
These are the main inheritance tax figures, unchanged for both tax years.
| Allowance or rate | 2026/27 and 2027/28 |
|---|---|
| Basic tax-free allowance | £325,000 |
| Home allowance | Up to £175,000, reduced above £2 million |
| Tax rate | 40%, or 36% if 10% goes to charity |
| Full business and farm relief | First £2.5 million, then 50% |
| Annual gift allowance | £3,000 |
Gifts into most trusts above the allowance face a 20% charge when they are made, rather than 40% on death. Inheritance tax is usually due six months after the end of the month of death, and HMRC charges interest after that.
Why frozen allowances matter
The basic allowance has been £325,000 since 2009, and stays frozen until at least April 2031.
House prices and savings have grown since then, but the allowance has not. That means more families pay inheritance tax each year without any rule changing. HMRC estimated the freeze alone adds thousands of taxpaying estates.
A married couple or civil partners can still pass on up to £1 million together, if they use both allowances and leave their home to children or grandchildren. Unused allowances pass to the surviving partner, so the full amount is often used on the second death.
Estates worth more than £2 million lose £1 of the home allowance for every £2 above that level. From April 2027, pensions count towards that £2 million too.
Gifts and family businesses
The rules for gifts and business relief also stayed the same.
- Seven-year rule. Gifts become free of inheritance tax after seven years, with tax reduced on a sliding scale after three.
- Yearly allowances. £3,000 a year, plus any unused allowance from last year, small gifts up to £250 per person, and regular gifts from spare income.
- Wedding gifts. Up to £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else, tax-free.
- Business and farm relief. The £2.5 million allowance can pass to a surviving spouse, and tax can be paid over 10 years interest-free.
See our guide to gifting money to family.
Use the rules while they are stable
Stable rules are a good time to plan, before the pension change in April 2027.
A quick checklist:
- Does your will make full use of both partners’ allowances?
- Will your home pass to children or grandchildren, so the home allowance applies?
- Are you using your yearly gift allowances?
- Is any life cover written in trust?
See where you stand with our inheritance tax calculator.
How PJH Estate Planning can help
PJH Estate Planning can review your will, LPAs and tax plans against the latest rules. Start with our free Estate Health Check: 10 quick questions that show any gaps in your plans. You can visit our offices, or we can visit you at home.
Sources
- GOV.UK: Budget 2026 rates and allowances
- GOV.UK: Inheritance Tax thresholds and interest rates
- GOV.UK: Agricultural and business property relief changes
- GOV.UK: Inheritance Tax on gifts
General information as at October 2026. Not legal, financial or tax advice.