Inheritance Tax on Property 2026 — Thresholds, Rates and Who Pays

What Is Inheritance Tax?

Inheritance tax (IHT) is a tax levied by HMRC on the estate — the property, money and possessions — of someone who has died. In England, Wales, Scotland and Northern Ireland, the executor or administrator of the estate is responsible for calculating what is owed, filing the IHT return and paying the tax before probate is granted.

Property is usually the largest single asset in any estate, which is why it sits at the heart of IHT planning for most UK families.

The Nil Rate Band — £325,000

Every individual in the UK has a nil rate band (NRB) of **£325,000**. Assets up to this threshold pass to beneficiaries free of IHT. This figure has been frozen since 2009 and, following the 2024 Autumn Budget, remains frozen until at least **2030**. Inflation-driven house price growth means an ever-larger proportion of estates now exceed the threshold.

Above the NRB, the standard IHT rate is **40%**.

Example

An estate worth £600,000 with no other reliefs would generate an IHT bill of:

> (£600,000 − £325,000) × 40% = **£110,000**

The Residence Nil Rate Band — £175,000

A second allowance, the **residence nil rate band (RNRB)**, of £175,000 was introduced in 2017 and also frozen until 2030. It applies when a main residential property is passed to **direct descendants** — children (including adopted and step-children) or grandchildren. The property must have been the deceased's home at some point.

Combined, a single person can potentially pass on **£500,000** (£325,000 + £175,000) before IHT is charged.

The RNRB tapers away for estates worth more than **£2 million**, reducing by £1 for every £2 above that threshold.

The Married-Couple Advantage

Transfers between UK-domiciled spouses and civil partners are completely exempt from IHT — regardless of value. More usefully, any unused NRB or RNRB from the first spouse to die can be transferred to the survivor's estate. A married couple could therefore jointly shield up to **£1,000,000** (£650,000 NRB + £350,000 RNRB) from IHT.

The 36% Charitable Rate

If at least **10% of the net estate** (the value above the NRB) is left to a qualifying charity, the IHT rate on the remainder reduces from 40% to **36%**. This can produce a meaningful saving while also benefiting a chosen cause.

Who Actually Pays?

IHT is paid out of the estate before assets are distributed. The executor writes a cheque to HMRC, typically funded by bank accounts in the estate (banks will often release funds for this purpose before probate is granted). Beneficiaries receive their inheritance after the tax has been settled — they do not pay IHT personally.

Payment is due **six months after the end of the month of death**. Interest accrues on unpaid IHT beyond that date. Property can be paid in instalments over ten years if the estate lacks liquid assets, though interest applies.

Plan Ahead

IHT is one of the most avoidable taxes in the UK, provided planning starts early. Gifting, trusts, charity donations and life insurance written in trust can all reduce the eventual bill. Use our [Inheritance Tax Calculator](/inheritance-tax-calculator) to get an instant estimate of the IHT position on an estate — then read the guides below to explore which strategies might reduce it.