Inheritance Tax Thresholds in the UK: What You Need to Know

What the inheritance tax threshold means

The basic idea is simple: if the total value of the estate is below the available allowances, there may be no inheritance tax to pay. If it is above, tax may be due on the amount above the allowances.

The key point is that the ‘threshold’ can change depending on whether a spouse or civil partner is involved, whether a home is left to children, and whether gifts to charity apply.

Common allowances and how they combine

People usually talk about two main allowances: the nil rate band (a general allowance) and an additional allowance related to a main residence when it is left to direct descendants.

Who pays inheritance tax and how it is paid

If there is a will, the executor typically handles the inheritance tax process as part of administering the estate. If there is no will, the administrator usually does this. The tax is generally paid from the estate before beneficiaries receive distributions.

In many estates, the cash needed to pay tax is not immediately available. This is common when most value is in a property. Families sometimes use estate funds, sell assets, or use arrangements that allow payment from a bank account in the person’s name.

When inheritance tax is usually due

Inheritance tax is often handled early in the probate process. If it is paid late, interest may be charged and penalties can apply. Because of this, many families prioritise valuations and tax work before the grant.

Forms like IHT400: what they are and why they matter

Some estates require detailed inheritance tax forms. The forms collect information about the person’s money and property, debts, gifts, and other details so HMRC can assess what is due.

If you are not familiar with tax forms, it can be time-consuming. This is a common reason people choose professional support, especially when property is involved.

Ways to reduce inheritance tax (at a high level)

Many inheritance tax outcomes come down to who inherits, how property is owned, and timing. If you want a deeper walkthrough, see our guide on how to reduce inheritance tax.

• Check whether spouse or civil partner exemptions apply.
• Understand whether the home is being left to direct descendants.
• Consider charitable giving if it aligns with the family’s wishes.
• Get clear valuations, especially for property, to reduce uncertainty.

Frequently asked questions