Inheritance Tax is a tax on the estate of someone who has died - their property, money and possessions. Most estates don't pay any, because they're worth less than the tax-free threshold.
This page is general information, not tax advice. For your own situation, speak to a solicitor, an accountant or HMRC.
The tax-free threshold
Inheritance Tax is only paid on the part of an estate worth more than £325,000. This is called the nil-rate band.
Anything above the threshold is usually taxed at 40%.
Example
An estate worth £400,000 is £75,000 over the threshold. The tax is 40% of £75,000 - £30,000.
The extra allowance for your home
If you leave your home to your children or grandchildren - including adopted, foster and stepchildren - your threshold can rise to £500,000. This extra £175,000 is called the residence nil-rate band.
The extra allowance is gradually reduced for estates worth more than £2 million.
Leaving your estate to a husband, wife or civil partner
Anything you leave to your husband, wife or civil partner is usually free of Inheritance Tax.
If you don't use all of your threshold, the unused part can be added to your partner's threshold when they die. That means a married couple or civil partners can pass on up to £1 million without Inheritance Tax, if their home goes to their children or grandchildren.
This still works if your partner died many years ago, when the threshold was lower - it's worked out as a percentage of the allowance they didn't use. It isn't automatic: the executors of the second estate have to claim it.
Leaving money to charity
Gifts to charity are free of Inheritance Tax. If you leave at least 10% of your estate's net value to charity, the rate on some of the rest can fall from 40% to 36%.
Gifts made during your lifetime
Gifts you make while you're alive may be taxed if you give away more than £325,000 in total and die within 7 years.
Some gifts are always tax-free, including:
- gifts to your husband, wife or civil partner
- gifts to charity
- up to £3,000 a year in total - the annual exemption
- small gifts of up to £250 each to as many people as you like, as long as you haven't used another allowance on the same person
Pensions: the change from April 2027
From 6 April 2027, most unused pension funds and pension death benefits will count as part of a person's estate for Inheritance Tax. Until now most pensions have been left out, so this will mean some estates pay Inheritance Tax for the first time.
Death-in-service benefits from a registered pension scheme are not affected.
The executors - known as personal representatives - will be responsible for reporting and paying any tax due on pensions.
Paying the tax
Inheritance Tax is usually paid by the executor from the estate, normally by the end of the sixth month after the death. Some or all of it usually has to be paid before probate is granted. See our guide to probate.
Official guidance: gov.uk/inheritance-tax
Reviewed by the Arranging a Funeral team - September 2026. Checked against GOV.UK.
Common questions
When is Inheritance Tax paid?
Only on the part of an estate worth more than £325,000, the nil-rate band. Most estates don't pay any.
What is the rate of Inheritance Tax?
Usually 40% on the amount above the threshold.
Is there an extra allowance for a home?
Yes. If you leave your home to your children or grandchildren, your threshold can rise to £500,000.
Is there Inheritance Tax between husbands, wives and civil partners?
Usually not, and any unused threshold can be passed to your partner, so a couple can pass on up to £1 million if their home goes to their children or grandchildren. The executors have to claim it.
Does leaving money to charity help?
Gifts to charity are free of Inheritance Tax, and leaving at least 10% of the net estate to charity can cut the rate on some of the rest from 40% to 36%.