Inheritance Tax UK — understand the estate before making decisions.
Inheritance Tax decisions depend on who owns the assets, how they pass to beneficiaries, lifetime transfers, residence history and the rules applying at the relevant date. Britvex provides structured UK tax-information review and coordinates relevant reporting support within an agreed professional scope.
Facts before estimates
Understand the estate, allowances and evidence.
The tax calculation starts with the estate and the people who inherit it.
Headline allowances are helpful but not a personalised IHT calculation. A particular estate may have more or less relief depending on the family circumstances, gifts, residence history and asset mix.
£325,000 per person
For 2026–27, the standard nil-rate band is £325,000. The unused percentage may be transferable between spouses or civil partners where the statutory conditions apply.
Up to £175,000 more
A qualifying residence passing on death to direct descendants can attract an additional allowance of up to £175,000, subject to eligible property, downsizing, taper and transferable percentages.
Taper above £2 million
The residence nil-rate band is generally reduced by £1 per £2 of net estate value above £2 million. An allowance advertised as automatic can therefore disappear on a larger estate.
Normally 40% on the taxable excess
The usual 40% rate applies after available allowances, reliefs and exemptions. Qualifying charitable gifts meeting specific conditions may permit a 36% reduced rate on the relevant part of the estate.
Value → classify → review → report.
Estate tax work should follow a documented sequence. The executor or personal representative remains responsible for administration and for appointing any required legal or specialist advisers.
Identify assets and liabilities.
Document property ownership, bank balances, shares, company interests, personal possessions, pensions, debts, loans and jointly held assets. Identify beneficial as well as formal ownership.
Establish date-of-death values.
Obtain supportable market values and debts at the relevant date. Some business, agricultural and trust assets require specialist valuation or legal input; do not rely on insurance values alone.
Review gifts and prior transfers.
Gather gifts, trusts, potentially exempt transfers, retained benefits, regular gifts out of income and records from the years preceding death.
Evaluate exemptions and reliefs.
Consider nil-rate bands, residence qualification, spouse/civil partner and charity exemptions, business/agricultural relief and the effect of residence history.
Identify returns, tax and probate timing.
Decide whether full IHT400 reporting is required, obtain the relevant HMRC reference, coordinate evidence for returns and plan tax payment—often before probate.
Reconcile and retain supporting evidence.
Maintain a clear workpaper showing valuations, relief calculations, supporting documents and advisers’ responsibilities, with follow-up for HMRC questions if within scope.
The seven-year rule is real—but it is not a universal exemption.
A tax-efficient transfer must be genuine, documented and assessed against exemptions, gifts with reservation, trust rules and the death-date facts.
A genuine outright gift to an individual can be a potentially exempt transfer. If the donor survives seven years, it generally falls outside the donor’s estate for IHT; exceptions and retained benefits matter.
An individual normally has a £3,000 annual gift exemption, with unused exemption carried forward at most one tax year. Other reliefs include small gifts, wedding gifts and qualifying normal expenditure out of income.
Taper relief on certain taxable lifetime gifts reduces the tax payable on that gift after three years; it does not reduce the value of the gift for every purpose or automatically reduce tax on the remaining death estate.
If the donor gives away an asset but continues to benefit—for instance, gives away a home but occupies it rent-free—the asset may still be considered in the death estate. The tax position depends on the arrangements.
Transfers to trusts can create immediate lifetime charges, ten-year and exit charges, and separate reporting obligations. A seven-year survival rule does not resolve every trust scenario.
IHT scope is not just a question of nationality or where the family lives.
A deceased person may have UK property, overseas assets, recent UK residence or assets held via companies and trusts. Each feature can affect the taxable estate and the available treaty or statutory relief.
Long-term UK residence after April 2025
From 6 April 2025, the UK’s inheritance-tax exposure for non-UK assets is generally determined through the long-term UK residence rules and relevant transitional provisions rather than the historic domicile/deemed-domicile test alone. Usually the review asks whether the person was UK tax resident for at least 10 of the prior 20 years and applies the relevant leaving-UK rules.
UK-situated assets and non-residents
Being resident overseas does not automatically mean that UK real estate, certain investments or business interests are outside UK IHT. Situs, ownership structure, excluded property rules and any applicable treaty require review.
Property and family homes
An inherited home is not automatically eligible for the residence nil-rate band. Direct descendants, qualifying ownership, value, any downsizing provisions and estate tapering affect the amount. Transfers to trusts can complicate eligibility.
Other taxes and legal processes
A disposal or gift may also involve Capital Gains Tax, Stamp Duty Land Tax, corporation or trust rules, alongside conveyancing and succession-law requirements. Britvex should coordinate UK tax information and refer legal documents and investment decisions to appropriate specialists.
Business and agricultural relief now need a specific allowance check.
The 2026 reforms change how certain qualifying trading and agricultural assets can be relieved. They should not be described using obsolete £1 million headline figures.
For deaths and relevant transfers on or after 6 April 2026, a £2.5 million allowance generally covers the combined qualifying value eligible for 100% agricultural property relief and business property relief.
Eligible qualifying property above the applicable £2.5 million allowance generally receives relief at 50%, subject to the category and detailed rules. A full claim depends on asset qualification.
Unused allowance may transfer to a surviving spouse or civil partner, including transitional situations where the first death occurred before 6 April 2026.
Certain not-listed shares attract only 50% business property relief. Trusts, lifetime transfers and the operation of allowances have further rules that require detailed consideration.
Investment businesses, ownership periods, trading status and other statutory conditions matter. The existence of company shares does not by itself establish business property relief.
Future pension reform should be planned for—but not applied to past deaths.
The rules for most unused pension funds and pension death benefits change for deaths on or after 6 April 2027. Existing exclusions, pension scheme practices and information-sharing procedures remain important.
Change already legislated
Finance Act 2026 provides for most unused pension funds and pension death benefits to be brought into the estate for inheritance-tax purposes from 6 April 2027. HMRC’s technical notes explain the administration and information-sharing model, with further operational guidance to follow.
Important exceptions
Not all pension-related benefits are treated identically. For example, registered-scheme death-in-service benefits and some dependant pension arrangements can be excluded. The precise type of pension and benefit matters.
Executors and administrators
From the implementation date, personal representatives may need additional data from pension scheme administrators to calculate the estate and tax liability. Keep pension records organised and review beneficiary details with the appropriate financial and legal specialists.
Do not blend tax years
For a death before 6 April 2027, do not automatically apply the new pension inclusion rules simply because a pension payment is made after April 2027. The relevant event and legislation must be identified.
Reporting and payment are not the same deadline.
Executors should not wait for probate to begin reviewing the estate. In many cases some Inheritance Tax must be paid before probate is granted.
IHT is generally payable by the end of the sixth month after the month of death, with interest usually accruing after the deadline. Some categories of assets may qualify for annual instalments.
If full details are required, form IHT400 is generally due within 12 months after the end of the month of death. The probate application and IHT payment process may require it sooner.
Asset values commonly refer to the date of death, with special rules for some disposals, reliefs or events. A supportable valuation methodology matters where estates include property or private-company shares.
Personal representatives normally need to address IHT payment and receive the relevant confirmation before applying for probate or confirmation, as appropriate for the UK jurisdiction.
Legal authority to administer an estate and prepare grant applications is not the same as preparing tax schedules. Appropriate solicitors, probate practitioners and financial advisers may need to be involved.
Good IHT reporting depends on complete evidence, not just estimates.
A clear asset and transfer schedule can reduce duplicated requests between accountants, valuers, solicitors and personal representatives. Keep records safe and establish who is authorised to provide them.
Will, executor details and probate/administration status if applicable.
Property, bank, investments, business interests, insurance and liabilities.
Joint ownership, trusts, shares, beneficial interests and overseas assets.
Lifetime transfers, gifts with reservation and supporting records.
Beneficiaries and any available transferred nil-rate bands.
UK tax residence and overseas asset information relevant to scope.
Scheme contacts, benefit types and relevant death-date rules.
Supporting documents for residence, business, agriculture, charity and other claims.
A property or business estate can involve more than IHT.
Use the relevant Britvex pages for the other tax obligations that may arise. Legal and regulated planning services remain separately scoped.
Clear scope. Professional records. Connected support.
Britvex works within a defined engagement and its current regulatory position. We distinguish financial information, specialist tax review and decisions that require external legal or regulated professional advice.
Check the source, not just the summary.
The position can depend on the relevant tax year, accounting period, facts and later legislation. These official sources underpin the general explanations above.
- Current IHT rates and allowances — HMRC / GOV.UK
- Gifts, exemptions and seven-year rule — HMRC / GOV.UK
- Valuing and reporting an estate — HMRC / GOV.UK
- APR/BPR changes from April 2026 — HMRC / GOV.UK
- Pension IHT reform from April 2027 — HMRC / GOV.UK
- Long-term UK residence and IHT — HMRC / GOV.UK
Material is general information and not a substitute for advice on your own circumstances. Regulatory material last reviewed 29 October 2026.
Questions worth answering before you act.
These practical answers explain general UK rules and what information is needed for a proper review. Specific legal and tax outcomes depend on the period, facts and current HMRC guidance.
What is the UK Inheritance Tax rate?
The standard rate is generally 40% on the taxable value above available allowances and after relevant exemptions and reliefs. A reduced 36% rate can apply if qualifying charitable gifts meet the statutory 10% test.
What is the inheritance tax threshold in 2026?
The standard nil-rate band is £325,000. An additional residence nil-rate band of up to £175,000 may apply when a qualifying home passes to direct descendants, subject to conditions and tapering.
Can a married couple pass on £1 million without inheritance tax?
In some qualifying circumstances, the standard and residence nil-rate bands from both spouses or civil partners may combine to £1 million on the second death. This is not automatic for all estates, homes or family relationships.
Does the residence nil-rate band taper on large estates?
Yes. It is generally reduced by £1 for every £2 by which the relevant net estate exceeds £2 million. Other technical rules and the available unused or transferable percentage can affect the calculation.
Are gifts made more than seven years before death tax free?
Many outright lifetime gifts are potentially exempt and fall outside the estate if the donor survives seven years. Gifts into certain trusts, retained benefits and other exceptions can change the outcome.
What is the annual Inheritance Tax gift exemption?
The usual annual exemption is £3,000 in total per tax year, with one year of unused exemption potentially carried forward. Separate conditions apply to small gifts, wedding gifts and normal expenditure out of income.
Can I give away my home and continue living in it?
Giving away a home while retaining the benefit of living there rent-free can be a gift with reservation and may still leave the property in the taxable estate. Legal ownership alone does not settle the tax treatment.
When must inheritance tax be paid after a death?
For most estates, any Inheritance Tax due must be paid by the end of the sixth month after the month of death to avoid interest, even if probate has not yet been granted. Special payment-by-instalment rules may apply to certain assets.
When is form IHT400 required?
Full estate reporting on form IHT400 is required in applicable circumstances, including many estates where Inheritance Tax is payable or full details are necessary. The return is normally due within 12 months after the end of the month of death; probate and payment timings can require earlier action.
What changed for business and agricultural relief in April 2026?
From 6 April 2026, an allowance of £2.5 million generally applies to the combined qualifying value eligible for 100% agricultural or business property relief; qualifying value above the allowance may receive 50% relief. Transfers between spouses and detailed trust or transitional rules require careful checking.
Will inherited pensions be subject to Inheritance Tax from April 2027?
Most unused pension funds and pension death benefits are due to enter the estate for Inheritance Tax purposes for deaths on or after 6 April 2027, subject to exclusions and detailed administration rules. They are not automatically within the same treatment for deaths before that date.
Does a non-UK resident owe UK inheritance tax?
UK-situated assets can remain relevant. From 6 April 2025, exposure to non-UK assets depends on the long-term UK residence rules and transitional provisions rather than the old domicile test alone.
Does Britvex prepare wills or provide probate legal services?
This page concerns tax information, records, allowances and potential accounting or reporting support within an agreed scope. Wills, contentious estates, trust deeds, probate applications and regulated legal or investment advice should be referred to appropriately qualified professionals.
What records should an executor gather?
Prepare asset and liability schedules, property and investment valuations, gifts for the relevant period, details of the deceased’s residence history, will and beneficiary information, pension arrangements and evidence supporting any exemptions or reliefs.
Bring the facts. We’ll define the next professional step.
Contact Britvex about Inheritance Tax reporting. We confirm the work required, the records to supply and the agreed scope before undertaking client services. We do not guarantee a tax result, authority decision or filing outcome.
United Kingdom · International clients
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