Inheritance Tax basics

Inheritance tax is charged on what you leave behind, and on some gifts made in the seven years before death. It has its own topic on this site, because it's the area where planning makes the most difference and where the detail matters most.

The short version

Everyone has a nil rate band of £325,000 that passes free of inheritance tax. There's an additional residence nil rate band of up to £175,000 where a home passes to direct descendants, tapering away for larger estates.

Anything passing to a spouse or civil partner is exempt, and unused allowances transfer to them — which is why a couple can often pass on up to £1 million between them.

Above the available allowances, the rate is 40%.

Most estates pay nothing at all. For those that do, the amount is usually reducible with planning done early enough.

Where to read properly

The Inheritance and estate planning topic covers this in full, including the four main strategies for reducing a liability and the changes coming from April 2027 that bring unused pension funds within the estate.

Start with the four strategies, or run your own figures through the Inheritance Tax Calculator.

This article is for general education only and isn't personal advice.