1. Overview

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if:

  • the value of your estate is below the £325,000 threshold
  • you leave everything to your spouse or civil partner, a charity or a community amateur sports club

If you’re married or in a civil partnership and your estate is worth less than £325,000, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £650,000.

Inheritance Tax rates

Inheritance Tax is charged on your estate at 40%.

The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your will.

If Inheritance Tax on gifts is due, it’s charged on a sliding scale known as taper relief.

Inheritance Tax reliefs, such as Business Relief, allow some assets to be passed on free of Inheritance Tax or with a reduced bill.

Contact the probate and Inheritance Tax helpline if your estate includes a farm or woodland.

Who pays the tax to HMRC

Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor’, if there’s a will).

Your beneficiaries (the people who inherit your estate) don’t normally pay tax on things they inherit. There are some exceptions.

They may have other taxes to pay, for instance if they get rental income from a house left to them in a will.

People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.