About IHT Tax
A plain-English introduction to the tax, its thresholds, and who it applies to.
Inheritance Tax (IHT) is a tax on the value of everything you own — your estate — when you die. It can also apply to some gifts made during your lifetime. Your estate includes your property, savings, investments, pensions (from April 2027), vehicles, and personal possessions, less any debts you owe.
In most cases, Inheritance Tax is paid by your estate before anything is passed on to your beneficiaries, rather than being paid by the people who inherit from you.
| Allowance | Amount | Notes |
|---|---|---|
| Nil-rate band | £325,000 | The amount everyone can pass on tax-free, frozen for several years |
| Residence nil-rate band | £175,000 | An additional allowance when a main home is left to children or grandchildren |
| Combined for a married couple | Up to £1,000,000 | Unused allowances can typically be passed between spouses and civil partners |
Above these allowances, Inheritance Tax is charged at 40% on the value of the estate that exceeds the threshold.
Inheritance Tax isn't only a concern for the very wealthy. If the total value of your home, savings, pension and other assets adds up to more than your available allowances, your estate is likely to face a tax bill. With property values having risen steadily and the allowances frozen, many families who would never have considered themselves "wealthy" are now caught by it.
Together, these changes mean many more families and business owners will need to plan ahead. See how Inheritance Tax is actually worked out for more detail on valuations, gifting rules, and trusts.