What is the Inheritance Tax threshold in the UK?

The standard nil-rate band is £325,000 per person. An additional residence nil-rate band of up to £175,000 applies when a main home is left to direct descendants. Together, a couple may pass on up to £1 million tax-free.

Who pays Inheritance Tax — the estate or the beneficiary?

Inheritance Tax is paid by the estate of the deceased, usually by the executor, before assets are distributed. Beneficiaries do not normally pay IHT directly on what they receive.

What is the 7-year rule on gifts?

Gifts made within 7 years before death may count toward the estate for Inheritance Tax. Taper relief reduces the tax owed on gifts made between 3 and 7 years before death.

How much can I inherit tax-free in the UK?

Beneficiaries usually do not pay tax on inheritances themselves. The tax falls on the estate above £325,000 — or up to £500,000 when the residence nil-rate band applies.

Do I pay tax on inherited cash in the UK?

Cash inherited from a UK estate is not taxed in the recipient's hands. However, interest earned after you receive it is taxable as savings income, subject to your Personal Savings Allowance.

Is inherited property subject to Capital Gains Tax?

There is no Capital Gains Tax when you inherit a property. CGT may apply later, on any rise in value between the date of death and the date you sell it.

Inheritance Tax Explained UK 2025 | Thresholds & Allowances

Reviewed for accuracy and UK relevance by the Inheritance Money Advice editorial team· Last reviewed May 2026

What is Inheritance Tax?

Inheritance Tax is a UK tax on the estate of someone who has died — their property, money and possessions. The standard rate is 40% on the value of the estate above the available threshold.

Current UK thresholds

Nil-rate band: £325,000 per person
Residence nil-rate band: up to £175,000 when a main home passes to children or grandchildren
Combined for couples: up to £1 million can pass tax-free

Thresholds are frozen until at least April 2028. Always check the latest figures at gov.uk/inheritance-tax.

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Who actually pays the tax?

The estate pays IHT, normally settled by the executor before distributing assets. As a beneficiary, the money you receive has typically already had any IHT deducted.

The 7-year rule on gifts

Gifts given by the deceased within 7 years of death may be added back to the estate. Taper relief reduces the rate where the gift was made between 3 and 7 years before death.

What about tax on what you do next?

While IHT is usually settled, you may face Income Tax on interest from savings, Dividend Tax on shares, or Capital Gains Tax when selling inherited assets. Sensible use of ISAs and pensions can shelter much of this.

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When to seek professional advice

If the estate is complex — including property, businesses, or international assets — speak to a qualified tax adviser or solicitor. For ongoing planning, an FCA-regulated financial adviser can help you structure things efficiently.

Published January 2025 · Last reviewed May 2026

Inheritance Tax Explained: A UK Guide For Beneficiaries