How Much Can I Inherit Tax-Free In The UK?

Most people search this question in one of two mindsets: either they are expecting an inheritance and want to know what they'll receive, or they are planning their own estate and want to understand what their family will keep.

Either way, the answer is the same — and more generous than many people expect.

The two allowances explained simply

UK Inheritance Tax works on the estate, not the person inheriting. Think of it as two separate tax-free pots that stack together.

1. The nil-rate band — £325,000

This is the standard allowance. Every person in the UK can leave up to £325,000 of assets tax-free to anyone they choose. It doesn't matter who receives it — family, friends, charity. The first £325,000 is tax-free.

Anything above £325,000 is taxed at 40%.

2. The residence nil-rate band — £175,000

This is an extra allowance specifically for passing on a main home to direct descendants. It only applies if:

• The estate includes a home the person lived in.
• That home is left to direct descendants — children, grandchildren, step-children, adopted or foster children.
• The total estate is worth less than £2 million (it tapers away above this).

This brings the total tax-free amount to £500,000 per person.

Here's what most people don't realise

The tax is paid by the estate, not by you. This is the single biggest point of confusion.

If your aunt leaves you £50,000 from an estate worth £400,000, you do not receive a tax bill. The executor pays the 40% tax on the £75,000 above the £325,000 threshold, then distributes what's left. Your £50,000 arrives net of tax — you don't need to declare it to HMRC or pay anything further.

Another common misconception: the allowance is per estate, not per beneficiary. You don't get a personal £325,000 exemption. If the estate is worth £600,000 and is split between three children, the estate still pays tax on £275,000 — not on each child's share.

How married couples can pass on up to £1 million

When a spouse or civil partner dies, any unused nil-rate band and residence nil-rate band transfers to the surviving partner.

Here's how it works in practice:

• John dies and leaves everything to his wife Mary. This transfer is tax-free, so John uses £0 of his £325,000 allowance.
• Mary inherits John's unused £325,000 allowance, giving her £650,000 in total.
• John also didn't use his £175,000 residence band, so Mary gets that too — £350,000 in total residence allowance.
• When Mary later dies, she can leave up to £1,000,000 tax-free to their children.

The transfer happens automatically — the executor just needs to claim it on the second death using HMRC form IHT402.

Inheriting from more than one person

Each estate has its own allowances. If you inherit £200,000 from your mother and £250,000 from your father (at different times), both amounts can be completely tax-free — each estate is assessed separately.

The same applies if you receive money from a grandparent, aunt, or family friend. Their estate's allowance is independent of anyone else's.

The key options if an estate is above the threshold

If the estate you're inheriting from is worth more than the tax-free amount, the 40% tax is unavoidable on the excess — but there are ways the person leaving the money could have reduced it.

1. Lifetime gifts

Gifts made more than 7 years before death are usually tax-free. There are also annual exemptions — £3,000 per year, plus unlimited small gifts up to £250 per person. See our guide ongifting rules and the 7-year rule.

2. Charitable giving

Leaving 10% or more of the estate to charity reduces the tax rate from 40% to 36% on the rest — a small but meaningful saving.

3. Pensions (until April 2027)

Pensions are currently outside the estate for IHT purposes. From April 2027, most unused pension pots will be included — making the current window significant for estate planning.

4. Trusts

Certain trusts can reduce IHT over time, but they are complex and require specialist advice. They are not a DIY option.

What people typically do

• Check the estate's total value with the executor — include property, savings, investments, and valuables.
• Confirm whether a main home is being left to children or grandchildren (triggers the extra £175,000).
• Ask the executor if any lifetime gifts were made in the last 7 years — these may use part of the allowance.
• Wait for probate to complete and the estate to settle tax before expecting any funds.
• Move the inherited money to an FSCS-protected account while deciding long-term plans.

Top 5 risks to be aware of

1. Assuming the tax is your problem. It's the estate's responsibility — but delays in probate can mean long waits before you receive anything.
2. Not checking for transferable allowances. If a spouse died earlier and their allowance wasn't claimed, the surviving partner's estate may be overpaying tax.
3. Forgetting about lifetime gifts. Large gifts made in the 7 years before death are added back to the estate value and may use up the nil-rate band.
4. The £2 million taper trap. Estates worth over £2 million lose £1 of residence nil-rate band for every £2 above the threshold. At £2.35 million, it's gone entirely.
5. DIY estate administration. Complex estates with property, trusts, or business assets often need professional help. Mistakes can be costly and personally liability falls on the executor.

An example scenario

Robert and Linda, married, own a semi-detached house worth £450,000 and have £200,000 in savings and investments. Total estate: £650,000.

• Robert dies first and leaves everything to Linda. No tax is due — spouse transfers are tax-free.
• Linda later dies and leaves everything to their two children.
• Linda's estate can claim Robert's unused £325,000 + £175,000 = £500,000 allowance.
• Linda also has her own £500,000 allowance.
• Total tax-free: £1,000,000. Estate value: £650,000. No Inheritance Tax is due at all.

If they had not been married, Robert's £325,000 would be tax-free and the remaining £325,000 would be taxed at 40% — a £130,000 bill.

What this means for you

If you're inheriting from a single person with a modest estate, Inheritance Tax may not apply at all. The average UK estate is well below the £325,000 threshold — only around 4% of estates currently pay IHT.

If the estate includes property in London or the South East, or significant savings, the numbers change quickly. A £600,000 estate with a home left to children would still be completely tax-free. A £700,000 estate would pay 40% on just £200,000 — £80,000 in tax.

The key is knowing the numbers early, so you're not surprised when probate completes.

What people regret later

The most common regret is not knowing about transferable allowances. A surviving spouse dies without claiming their partner's unused allowance, and the children lose £325,000 or more of tax-free inheritance.

The second is making large gifts in the final years of life without understanding the 7-year rule — the gifts are clawed back into the estate and can unexpectedly push the total over the threshold.

Simple next steps

1. Ask the executor for the estate's approximate total value — property, savings, investments, and valuables.
2. Check whether the deceased was married or in a civil partnership — transferable allowances may apply.
3. Confirm if a main home is being left to children or grandchildren — this triggers the extra £175,000.
4. Wait for probate and estate settlement before making any financial decisions.
5. Move your inheritance to an FSCS-protected savings account while you plan — see where to put inheritance money safely.
6. For estates near or above the threshold, consider one-off advice from an FCA-regulated adviser — see speak to an adviser.

Where this fits in the bigger picture

Understanding the tax-free limits is the first step. For the complete framework on what to do once you receive an inheritance, seewhat to do with an inheritance. For guidance on reducing tax before it applies, seehow to reduce Inheritance Tax legally.

Published January 2025 · Last reviewed September 2026