Inheritance tax is a tax on the estate — the property, money and possessions — of someone who has died. Many estates pay no inheritance tax at all, but it is worth understanding the thresholds and reliefs so you can plan ahead or know what to expect. This guide explains how inheritance tax works in the UK.
What is inheritance tax?
Inheritance tax (IHT) is usually charged at 40% on the part of an estate that is above the tax-free threshold. If the whole estate falls below the threshold, there is normally no inheritance tax to pay. The tax is paid from the estate before what is left is passed to the beneficiaries.
What is the inheritance tax threshold?
Everyone has a nil-rate band of £325,000 (2026/27). If you leave your home to your children, grandchildren or other direct descendants, you may also get the residence nil-rate band of £175,000 if the estate is worth less than £2 million if the estate is worth less than £2 million — bringing the total to up to £500,000 for one person. Because any unused allowance passes to a surviving spouse or civil partner, a married couple can potentially pass on up to £1 million tax-free. These thresholds are frozen for the rest of the decade.
What is the inheritance tax rate?
The standard rate is 40% on the value above the threshold. A reduced rate of 36% applies if you leave at least 10% of your net estate to charity.
Who is exempt from inheritance tax?
Anything you leave to a spouse or civil partner is normally free of inheritance tax, with no limit. Gifts to registered charities are also exempt. This is why married couples and civil partners often pay no inheritance tax when the first partner dies.
How are gifts treated? The 7-year rule
Gifts you make during your lifetime can still count towards inheritance tax if you die within 7 years of making them. Gifts made more than 7 years before death are usually exempt, and taper relief can reduce the tax due on gifts made between 3 and 7 years before death. Taper relief only applies if the total value of gifts made in the 7 years before death is over the £325,000 tax-free threshold, and it reduces the tax charged on the gift, not the value of the gift itself (see GOV.UK’s guidance on gifts). You can also give away up to £3,000 a year (the annual exemption) without it counting towards your estate.
When and how is inheritance tax paid?
The executors or administrators report the estate’s value to HMRC and pay any tax due. Inheritance tax is generally due by the end of the sixth month after the person died, and usually has to be paid before probate is granted. Tax on some assets, such as property, can be paid in instalments.
Frequently asked questions
Do I pay inheritance tax on money left to my husband or wife?
No. Transfers between spouses and civil partners are normally exempt from inheritance tax, with no upper limit. Different rules can apply in cross-border situations, so check GOV.UK or ask HMRC if you or your partner live abroad. Different rules can apply in cross-border situations, so check GOV.UK or ask HMRC if you or your partner live abroad.
How much can you inherit tax-free in the UK?
The thresholds apply to the estate of the person who died, not to each person who inherits. An estate can usually pass on up to £325,000 tax-free, or up to £500,000 if a home is left to children or grandchildren and the estate is worth less than £2 million — and up to £1 million for a married couple or civil partners combined, because unused threshold can pass to the surviving partner. See GOV.UK for the current rules.
Are pensions subject to inheritance tax?
Most are outside the estate today, but from 6 April 2027 most unused pensions will be included. See our guide to pensions when you die.
How Solace Care can help
Working out an estate’s value and what tax may be due is one of the most stressful parts of administering an estate. Solace Care helps you keep the figures, documents and deadlines in one place. Want help with the practical side after a death? Create a Solace Care account or read more guides.
