Inheritance Tax in the UK: Rates, Thresholds and Exemptions

Inheritance tax (IHT) is a UK-wide tax charged at 40% on the value of an estate above the available nil-rate bands, reduced to 36% where at least a tenth of the estate passes to charity. This guide explains the current bands, exemptions and payment deadlines.

What Is Inheritance Tax?

Inheritance tax (IHT) is a UK-wide tax on the value of a person's estate, meaning their property, money and possessions, when they die. It also applies to some gifts made in the seven years before death. HM Revenue & Customs (HMRC) charges IHT on the value of the estate above the available tax-free allowances, known as the nil-rate bands. If the whole estate, plus any taxable gifts, sits below those bands, no IHT is due. Many UK estates pay no inheritance tax at all, because they fall under the combined nil-rate and residence nil-rate bands, especially once transfers between spouses and civil partners are taken into account. The tax is the same across England, Wales, Scotland and Northern Ireland; unlike probate or intestacy, IHT is not devolved and does not vary by nation.

How Much Is Inheritance Tax?

The standard rate of inheritance tax is 40%, charged on the part of an estate above the available nil-rate bands. A reduced rate of 36% applies instead where 10% or more of the net estate, broadly the estate after debts, reliefs and the nil-rate band are accounted for, is left to charity in the will. The 36% rate is an incentive built into the rules rather than an automatic reduction, so it only applies where the gift to charity meets that 10% test. Below the available bands, no tax is charged on that part of the estate at all. IHT is worked out on the whole taxable estate at once rather than as a series of smaller slices, so once the bands are used up, the 40% (or 36%) rate applies to everything above them.

Inheritance Tax Thresholds and Exemptions

The two main allowances are the nil-rate band and the residence nil-rate band, both frozen until April 2031, alongside a set of separate exemptions for spouses, charities and smaller gifts.

Exemptions and Reliefs That Reduce an IHT Bill

Two exemptions have no upper limit. Anything left to a spouse or civil partner who is domiciled in the UK passes free of inheritance tax, and so does anything left to a registered charity, however large the gift. Both matter for planning as well as tax: because they are unlimited, the first spouse to die often leaves an estate entirely tax-free even where it exceeds the nil-rate bands, with the unused percentage of those bands then available to the surviving spouse's own estate later. Smaller lifetime gifts are exempt outright rather than depending on the seven-year rule: £3,000 a year can be given away tax-free, with one year's unused allowance carried forward; £250 can be given to any number of individuals; and regular gifts made out of surplus income, rather than capital, can also be exempt if they do not reduce the giver's standard of living.

Gifts and the Seven-Year Rule

Gifts made during a person's lifetime, generally called potentially exempt transfers, fall outside the estate for inheritance tax purposes if the giver survives seven years after making them. If they die within seven years, the gift is brought back into account and uses up the nil-rate band first, ahead of anything left at death. Where a gift is large enough to exceed the remaining nil-rate band, taper relief can reduce the tax charged on the excess, on a sliding scale by years survived: none in the first three years, then 32%, 24%, 16% and 8% in each following year, down to nothing after seven years. Taper relief only reduces tax that is actually due; it does not help at all where the gift sits within the nil-rate band. See our guide to the inheritance tax seven-year rule for how taper relief is worked out in practice.

When Is Inheritance Tax Due?

Inheritance tax is normally due by the end of the sixth month after the month of death, for example by 30 September following a death in March. Interest starts to run on unpaid IHT after that date, whether or not probate has been granted. In practice, IHT often has to be paid, or arrangements made to pay it, before a grant of probate or letters of administration is issued, because HMRC generally needs evidence that the tax position has been addressed before releasing the grant that lets an executor deal with most of the estate. Some funds held in the deceased's own bank accounts can sometimes be used directly to pay the bill through the Direct Payment Scheme, and instalment options exist for certain assets such as land and some business interests. See our guide to the probate process for how this fits into the wider timeline.

The 2027 Pension Change (Forthcoming)

From 6 April 2027, most unused pension pots and death benefits are due to be brought into the value of a person's estate for inheritance tax purposes, a change announced in the Autumn 2024 Budget. Until then, most pensions remain outside the estate for IHT, which is one reason they are often used as a later-life planning tool. This change has not yet taken effect: estates of people who die before 6 April 2027 are not affected by it. Anyone planning around pensions and inheritance tax should treat this as a forthcoming rule rather than a current one, and take advice on how it may affect their own position closer to the date.

Estimating Your Estate's Inheritance Tax

Because the nil-rate band, residence nil-rate band and any transferable allowance from a late spouse all interact, working out whether IHT is due, and how much, is rarely as simple as one flat percentage. Our UK inheritance tax calculator applies the current bands and taper rules to an estate value and home value to show the working, but it cannot account for every gift, relief or family circumstance and gives an estimate only. It is designed to illustrate how the bands apply, not to replace a formal valuation. For an actual estate, take advice from a solicitor, a qualified tax adviser, or HMRC's own guidance, particularly where gifts, business or agricultural assets, or trusts are involved.

For the specific pound figures behind these bands, see our guide to the inheritance tax threshold. If a gift was made during someone's lifetime, our guide to the inheritance tax seven-year rule covers taper relief in full. IHT interacts closely with applying for probate, since it is often paid before the grant is issued. Run your own numbers with the UK inheritance tax calculator, or see our wills, probate and inheritance tax hub and the wider United Kingdom law hub for the full picture across all four nations.

This article explains how UK inheritance tax generally works; it is not tax or legal advice and does not cover every estate, gift, trust or business relief. Thresholds, rates and reliefs can change, and HMRC's own guidance and current figures should always be checked before relying on any figure here. For an actual estate, take advice from a solicitor, a qualified tax adviser, or HMRC directly, particularly where the estate is large, includes a business, or involves gifts made in the years before death.