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Inheritance tax UK 2026/27: 40% tax on estates above £325,000 nil-rate band + optional £175,000 residence nil-rate band (if main home to children) = up to £500,000 per person, £1 million married couples. Due by the end of the sixth month after the month of death. 7-year rule: Gifts within 7 years of death potentially taxable—taper relief if survived 3-7 years, but only where the gifts exceed £325,000. Exemptions: Spouse/civil partner inheritance tax-free (unlimited), annual gift allowance £3,000, small gifts £250 per person, wedding gifts (£5K child, £2.5K grandchild, £1K other). Business/agricultural property relief: Up to 100% relief for qualifying assets. HMRC records 4.72% of UK deaths in 2023 to 2024 resulting in an IHT charge, and rising—frozen thresholds and asset price growth pulling more families into tax.
Want to know your actual IHT position?
Use our free 3-question IHT calculator — applies the £325,000 nil-rate band, £175,000 residence nil-rate band and spouse exemption automatically. No sign-up.
Open the IHT calculatorInheritance tax (IHT) is a 40% tax on estates above certain thresholds when someone dies. Most estates don't pay it, but if yours does, the bill can be substantial. This guide explains everything executors and beneficiaries need to know about UK inheritance tax in 2026/27.
Inheritance tax is a tax on the estate (property, money, and possessions) of someone who's died. According to HMRC, it's charged at 40% on the value of the estate above the tax-free threshold.
The good news: most estates do not pay it. HMRC's accredited Inheritance Tax liabilities statistics record that in the 2023 to 2024 tax year 4.72% of UK deaths resulted in an inheritance tax charge — 30,400 estates out of 644,000 deaths. That is the highest proportion since 2006 to 2007, and it has been under one in twenty since 2007 to 2008. Where tax was paid, HMRC puts the average effective rate at 13%, against the headline 40%, because of exemptions, reliefs and allowances.
The bad news: if your estate does exceed the threshold, the tax bill can be significant—40p for every pound over the limit.
There are two main tax-free allowances (also called nil-rate bands):
Everyone gets a personal allowance of £325,000. No inheritance tax is charged on estates worth up to this amount.
This threshold has been frozen since 2009 and is set to remain at £325,000 until 5 April 2031 according to GOV.UK. With house prices rising, more estates are being caught by IHT each year—a phenomenon called "fiscal drag".
If you leave your home to your children or grandchildren (direct descendants), you may get an additional allowance called the residence nil-rate band (RNRB).
The RNRB is:
For a single person leaving their home to children:
The RNRB is more complicated than the standard allowance. Here's what you need to know:
To claim the RNRB, all of these must be true:
If someone sold their home and moved into rented accommodation or a care home, they may still qualify for RNRB through downsizing relief—but this is complex and requires careful calculation.
Warning: The RNRB is one of the most complicated parts of UK tax law. If you're claiming it, consider professional advice—mistakes can cost tens of thousands in lost relief.
Here's where married couples get a big advantage:
Anything you leave to your spouse or civil partner is completely tax-free, regardless of value, as stated by HMRC. This means:
When the first spouse dies and leaves everything to the surviving spouse, their nil-rate bands aren't lost—they're transferred to the surviving spouse.
Example:
This is why married couples can often pass on estates worth up to £1 million without any inheritance tax.
If you give money or assets away during your lifetime, these gifts can affect your inheritance tax bill—depending on how long you live after making the gift.
If you survive for 7 years after making a gift, it falls completely outside your estate for IHT purposes. No tax is charged.
If you die within 7 years, the gift is added back to your estate and may be taxed—but the amount of tax reduces the longer you survive. This is called taper relief.
Two things are widely got wrong here. Taper relief reduces the tax charged on the gift, not the value of the gift itself. And it does not apply to every gift: GOV.UK is explicit that “taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold”. Below that threshold there is no tax on the gift to taper. The 40% figure in the first row is therefore the full rate applying to gifts above the threshold given within three years of death — it is not itself a taper rate.
| Years between gift and death | Tax rate on gift |
|---|---|
| 0-3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% |
Some gifts are completely exempt from IHT and don't count towards the 7-year rule:
Unlimited, provided your spouse or civil partner lives in the UK permanently — GOV.UK's wording. Since 6 April 2025 the underlying test is long-term UK residence (10 of the last 20 tax years), not domicile; where the survivor is not a long-term UK resident the spouse exemption is capped rather than unlimited.
Unlimited. Gifts to UK registered charities are completely exempt according to HMRC guidance.
Bonus: if you leave 10% or more of your estate to charity, the IHT rate on the rest drops from 40% to 36%.
You can give away £3,000 per year, tax-free. You can also carry forward one year's unused exemption, giving a maximum of £6,000 in one year if you didn't use last year's allowance.
You can give £250 to as many people as you like, each year, tax-free. You can't combine this with the annual exemption for the same person.
If you make regular gifts out of your normal income (not savings) that don't affect your standard of living, these are exempt. For example:
This exemption is powerful but poorly understood. Keep detailed records to prove the gifts were regular and from income.
Here's the step-by-step process:
Add up everything the person owned (see our guide to valuing an estate):
Subtract:
Subtract:
Whatever's left is taxed at 40% (or 36% if 10%+ goes to charity).
Estate of single person:
Deductions:
Allowances (leaving home to children):
Tax calculation:
According to HMRC, inheritance tax must be paid within 6 months of the end of the month in which the person died.
Examples:
The probate catch-22: You usually need to pay at least some IHT before you can get the grant of representation — called confirmation in Scotland, where you send form C1 with the IHT400 rather than applying for probate. But you often can't access the deceased's money to pay the tax without probate. Many executors need to arrange a loan or use their own funds temporarily.
If you pay late:
The IHT400 is HMRC's inheritance tax account form. It's required for estates that owe IHT or exceed certain thresholds.
The rule is the other way round from how it is usually stated: you complete IHT400 unless the estate is an excepted estate. GOV.UK says an estate is usually excepted if any of these apply:
Full details are still needed even where no tax is due if, among other things, the person gave away over £250,000 in the seven years before death (gifts alone do not trigger it below that), gave gifts they continued to benefit from, left an estate over £3 million, had foreign assets over £100,000, or held assets worth over £250,000 in trust.
The IHT400 is 19 pages long, and there are around twenty supplementary schedules (IHT401 to IHT437). Questions 29 to 48 of the form itself are a checklist telling you which of them you need. They cover:
This isn't a form you fill in over a cup of tea. It requires:
You can pay IHT:
If the deceased had accessible cash (bank accounts), some banks will release funds directly to HMRC before probate—but not all will.
Some banks offer specific IHT loans to executors. These are repaid once probate is granted and estate funds are accessible.
If the estate includes property, land, a business or certain unlisted shares, you can pay the tax in ten equal annual instalments. The first is due at the end of the sixth month after the death, and you pay no interest on that first instalment unless it is late; on later instalments interest runs on the outstanding balance. For assets inherited from 6 April 2026 onwards, instalments are interest-free where the asset qualifies for Agricultural Relief or Business Relief.
Executors can pay the tax personally and reclaim it from the estate once probate is granted.
If you're still alive and planning your estate, here are legitimate ways to reduce IHT:
Give away £3,000 per year. Over 10 years, that's £30,000 out of your estate tax-free.
Set up regular payments from your income (not capital) that don't affect your living standards. Potentially unlimited tax relief.
Completely tax-free, and if you leave 10%+ to charity, the tax rate on the rest drops to 36%.
Take out life insurance written in trust. The payout goes directly to beneficiaries outside your estate, so no IHT is charged on it.
You can't be taxed on money you've already spent. Enjoy your wealth while you can.
Qualifying business assets, shares, farms and agricultural land can still attract 100% relief, but for deaths on or after 6 April 2026 that 100% rate is capped. GOV.UK: “100% relief allowance on the combined value of qualifying agricultural or business property is limited to £2.5 million”. Above that ceiling the relief drops to 50%.
Warning: Tax planning should never be your only reason for financial decisions. Make sure any planning serves your life goals first, tax efficiency second.
If you're an executor dealing with someone's estate, calculating and paying inheritance tax is one of the most complex parts of the probate process.
You'll need to: