Inheritance Tax reaches a family at the worst moment and with the most confusion. The rules that decide whether anything is owed are short: a threshold, an addition for the home, an exemption for a spouse, and a share that passes between a couple. This page sets out each with its source, and links to the pages for the harder cases.
Will the estate owe anything
GOV.UK says there is normally no Inheritance Tax to pay if the value of the estate is below the £325,000 threshold. Nor is there any if everything above the threshold is left to a spouse, civil partner, a charity or a community amateur sports club (GOV.UK, How Inheritance Tax works: thresholds, rules and allowances: Overview, checked 1 November 2026). The estate is everything the person owned.
Above the threshold the rate is 40%, and GOV.UK says it is charged only on the part of the estate above it. Its example is an estate worth £500,000 with a £325,000 threshold: tax at 40% of £175,000. The threshold is a tax-free slice, not a cliff edge.
The home adds £175,000
GOV.UK says that if you own your home, or a share in it, the tax-free threshold can increase to £500,000 if you leave it to your children, including adopted, foster or stepchildren, or grandchildren, and the estate is worth less than £2 million (GOV.UK, thresholds, rules and allowances: Passing on a home, checked 1 November 2026). That extra £175,000 is the residence nil rate band.
It is capped at the value of the home, or the share of it, passing to them. Its guidance defines a direct descendant as a child, grandchild or later descendant, or their spouse or civil partner, including a step-child, adopted child, foster child or a child under a guardianship. It says direct descendants do not include nephews, nieces, siblings and other relatives (GOV.UK, checked 1 November 2026). A home left to a niece gets the £325,000 only.
Above £2 million the addition tapers. GOV.UK says the residence nil rate band reduces by £1 for every £2 that the estate is worth more than £2 million, even if a home is left to direct descendants. HMRC’s manual says the £2 million is measured after debts but before any exemptions or reliefs (HMRC Inheritance Tax Manual, IHTM46023, checked 1 November 2026).
A home sold before death is not lost either. HMRC’s manual says the downsizing provisions reinstate residence nil rate band that would otherwise have been lost through a sale or a move to a smaller home, as long as other assets are closely inherited, which it calls the downsizing addition (HMRC Inheritance Tax Manual, IHTM46050, checked 1 November 2026). The executors claim it on the same forms.
A married couple: the unused share passes
GOV.UK says that if you are married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die (GOV.UK, How Inheritance Tax works: thresholds, rules and allowances: Overview, checked 1 November 2026). A husband who leaves everything to his wife uses none of his.
His widow’s executors can then claim all of it on top of her own. The same applies to the £175,000 home addition. Two full sets, £500,000 each, come to £1 million; that figure is arithmetic from GOV.UK’s numbers rather than a GOV.UK quote. Our transferable allowance page covers how the share passes as a percentage, the forms, and the two-year deadline for claiming it. The threshold checker works out the figure that applies to a particular estate.
Frozen to when
Neither figure is rising. GOV.UK’s rates table shows the £325,000 threshold at that level from 6 April 2009 to 5 April 2031, and the £175,000 residence nil rate band at that level from 6 April 2020 to 5 April 2030 (GOV.UK, Inheritance Tax thresholds and interest rates, checked 1 November 2026).
Those are two different end dates in the same document, and this page quotes both rather than picking one. House prices have not stood still since 2009, which is why estates that would once have been well under the threshold now reach it.
Who pays
The estate pays, through whoever administers it. GOV.UK says funds from the estate are used to pay Inheritance Tax to HMRC, that this is done by the person dealing with the estate, the executor if there is a will, and that beneficiaries do not normally pay tax on things they inherit (GOV.UK, How Inheritance Tax works: thresholds, rules and allowances: Overview, checked 1 November 2026).
A beneficiary may owe other taxes later; GOV.UK’s example is rental income from a house left in a will, and our inherited property page covers Capital Gains Tax when it is sold. Where 10% or more of the net estate goes to charity, GOV.UK says the estate can pay a reduced rate of 36% on some assets.
The spouse exemption, and the unmarried partner
The Inheritance Tax Act says a transfer is exempt to the extent that the property becomes part of the estate of the transferor’s spouse or civil partner (Inheritance Tax Act 1984, section 18, checked 1 November 2026). There is no upper limit where both are long-term UK residents, and it does not extend to a partner who was never married.
Everything can pass to a widow or widower tax-free, and the tax question moves to her death.
Two limits. Where the person who dies is a long-term UK resident and the spouse is not, HMRC’s manual says the exemption is limited to the nil rate band at the date of transfer (HMRC Inheritance Tax Manual, IHTM47030, checked 1 November 2026). And GOV.UK’s exemption is for people who are legally married or in a civil partnership (GOV.UK, thresholds, rules and allowances: Rules on giving gifts, checked 1 November 2026); a partner of thirty years who never married is taxed like anyone else.
Gifts in the seven years before death
GOV.UK says Inheritance Tax may have to be paid on some gifts given less than seven years before death, depending on who received them, their value and when they were given (GOV.UK, thresholds, rules and allowances: Rules on giving gifts, checked 1 November 2026). Gifts in that window are added back to the estate when the threshold is tested.
Our gifts and the 7-year rule page covers the annual exemptions, taper relief and the gift-with-reservation trap, and the gifts timeline plots a family’s gifts against the seven years.
Pensions, from April 2027
Pensions have sat outside the estate. The government’s policy paper says most unused pension funds and death benefits will come into the scope of Inheritance Tax from 6 April 2027, with the executors, called personal representatives in the Act, liable for reporting and paying it (GOV.UK, Inheritance Tax: unused pension funds and death benefits, checked 1 November 2026).
For a couple the spouse exemption still applies to a pension left to the survivor. Our pensions and Inheritance Tax page covers what is caught, what is excluded, and the income tax that already applies where the member died at 75 or over.
Valuing the estate, and whether HMRC needs the full account
GOV.UK says to estimate the estate by adding the value of everything the person owned on the day they died, any gifts in the seven years before, and the value of any trusts they benefited from (GOV.UK, Estimate the estate’s value, checked 1 November 2026). A home owned jointly with a spouse is counted at half.
Three of the four kinds of estate GOV.UK lists escape the full Inheritance Tax account, form IHT400, as excepted estates. It says an estate is usually excepted if its value is below the threshold, if it is worth £650,000 or less and an unused threshold is being transferred from a spouse, or if everything was left to a spouse or charity and it is worth less than £3 million (GOV.UK, checked 1 November 2026). Our probate forms page covers the account itself.
The deadlines
Two clocks start at the death. GOV.UK says the full details of the estate must be sent within 12 months of the person dying and before applying for probate, with a possible penalty for missing it without a reasonable excuse (GOV.UK, If Inheritance Tax is due or full details are needed, checked 1 November 2026).
The tax itself is due sooner. GOV.UK says you must pay by the end of the sixth month after the person died, and that HMRC charges interest after that (GOV.UK, Pay your Inheritance Tax bill, checked 1 November 2026). The rate is 7.75% as of 9 January 2026 (GOV.UK, Inheritance Tax thresholds and interest rates, checked 1 November 2026). Our paying the bill page covers paying from the deceased’s bank before probate and instalments on a house.
Inheriting from abroad, and where to get help
Money left by a relative overseas worries families more than it should: the tax is on the estate of the person who died, not on the person receiving, and our inheriting from abroad page sets out when UK tax reaches a foreign estate at all.
For an estate near the threshold, GOV.UK says you can get professional advice from a solicitor or a tax adviser about what you can give away tax-free (GOV.UK, thresholds, rules and allowances: Rules on giving gifts, checked 1 November 2026). Our probate hub covers the process the executor is about to start, and the wills hub the document that decides who inherits in the first place.
Family businesses, farms and AIM shares are covered by a separate relief with its own allowance from April 2026: see Business Relief.