What is inheritance tax?
Inheritance tax is a UK tax on the value of a person's estate when they die, and on some lifetime gifts. It is charged at 40% on value above the available tax-free thresholds. Transfers between spouses and civil partners are generally exempt, whatever their size.
The main thresholds are the nil rate band of £325,000 and, where a main home passes to direct descendants, the residence nil rate band of £175,000. Both are per person and both are transferable between spouses, which is where the familiar £1 million figure for a couple comes from. Both are frozen until April 2031.
Where at least 10% of the net estate passes to charity, the rate on the rest falls from 40% to 36%. Reliefs for business and agricultural property were substantially reformed from April 2026, and unused pension funds come within the scope of the tax from April 2027.
Tax is generally due six months after the end of the month of death, and normally has to be paid before the grant is issued — which is why liquidity, not liability, is often the real planning problem.