Inheritance tax is one of the most misunderstood aspects of the probate process. Many families are surprised to discover that their loved one’s estate is liable — or equally surprised to discover that an estate they assumed was taxable is in fact well within the available thresholds. At Curtis Legal, we help executors understand their inheritance tax position clearly and ensure that every available exemption and relief is properly claimed before a penny is paid to HMRC unnecessarily.
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📊 Get Fee EstimateWhat Is Inheritance Tax?
Inheritance tax is a tax on the estate of a person who has died. It is charged at 40% on the value of the estate above the available nil-rate bands. Inheritance tax must be reported to HMRC and any tax due must be paid before the Grant of Probate will be issued — which means the executor must find funds to pay the inheritance tax before they can access most of the estate’s assets. Payment must be made by the end of the 6th month after the date of death.
HMRC’s inheritance tax thresholds and rates are updated periodically. The current rates for 2025/26 are set out below.
Current Inheritance Tax Thresholds
Nil-Rate Band — £325,000 Every individual has a nil-rate band of £325,000. The value of the estate up to this threshold is free from inheritance tax. Anything above it is taxed at 40%.
Residence Nil-Rate Band — £175,000 An additional residence nil-rate band of £175,000 is available where the deceased owned a residential property that is left to direct descendants — children, grandchildren or step-children. This brings the combined threshold to £500,000 per individual.
Transferable Nil-Rate Band Where a spouse or civil partner died without using all of their nil-rate band, the unused portion can be transferred to the surviving spouse’s estate. This means a married couple can have a combined threshold of up to £1,000,000 before inheritance tax becomes payable.
Inheritance Tax Rate — 40% Inheritance tax is charged at 40% on the value of the estate above the available threshold. A reduced rate of 36% applies where at least 10% of the net estate is left to a qualifying charity.
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Inheritance Tax Exemptions and Reliefs
A number of important inheritance tax exemptions and reliefs can significantly reduce the amount of inheritance tax payable:
Spouse and Civil Partner Exemption Assets passed to a surviving spouse or civil partner are entirely exempt from inheritance tax, regardless of value. This exemption is one of the most valuable available and means that inheritance tax is usually deferred rather than eliminated in many estates.
Charity Exemption Assets left to a qualifying UK charity are exempt from inheritance tax. Leaving at least 10% of the net estate to charity also reduces the inheritance tax rate on the remainder from 40% to 36%.
Business Property Relief Business assets — including shares in qualifying unquoted companies and interests in business partnerships — may qualify for Business Property Relief of up to 100%, significantly reducing or eliminating the inheritance tax liability on those assets.
Agricultural Property Relief Agricultural land and property may qualify for Agricultural Property Relief of up to 100%, subject to qualifying conditions including ownership and occupation requirements.
Annual Gift Exemption Gifts of up to £3,000 per year are exempt from inheritance tax. Gifts made more than seven years before death are generally also exempt — this is known as the seven-year rule and is one of the most commonly used inheritance tax planning strategies.
Small Gift Allowance Gifts of up to £250 per person are considered small gifts and you can give away as many gifts of this amount as you want each year as long as you have not used another gift allowance on the same person. Birthday and Christmas gifts you give from regular income are also exempt from Inheritance Tax.
Weddings and Civil Partnerships Gifts of up to £5,000 to a child, £2,500 to a grandchild or great grandchild and £1,000 to any other person can be made for a wedding or civil partnership and are exempt from Inheritance Tax.
Regular Payments You can make regular payments to another person to help with their living costs and there is no limit to how much you can give tax free provided you can show that you can afford the payments after meeting your usual living costs and you pay from regular monthly income.
When Must Inheritance Tax Be Paid?
Inheritance tax must be paid by the end of the sixth month after the month of death. For example, if someone died in January, the inheritance tax must be paid by the end of July. Interest accrues from the due date on any unpaid inheritance tax at the rate set by HMRC.
Where the estate includes property that cannot easily be sold quickly, HMRC allows the inheritance tax attributable to that property to be paid in ten equal annual instalments. This can significantly ease the cashflow pressure on the estate during the probate process.
Plain-English guide written by Simon Jenkins — covering every stage of the probate process.
How to Pay Inheritance Tax Before the Grant of Probate
This is one of the most common practical difficulties in the inheritance tax process — the tax must be This is one of the most common practical difficulties in the inheritance tax process — the tax must be paid before the Grant of Representation is issued, but the Grant is needed to access most of the estate’s assets. The options available to executors include:
- Using funds from the deceased’s bank accounts — many banks will release funds directly to HMRC to pay inheritance tax before probate is granted under the Direct Payment Scheme
- Using the executor’s own funds temporarily, to be reimbursed from the estate once probate is granted
- Taking out an executor’s loan specifically designed to bridge the inheritance tax payment
We regularly help executors navigate this practical challenge and will advise you on the most appropriate approach for the specific circumstances of the estate.
Common Inheritance Tax Mistakes to Avoid
Inheritance tax mistakes can be costly. Common errors that executors make include:
- Failing to claim the residence nil-rate band where it is available
- Failing to claim a transferred nil-rate band from a deceased spouse
- Undervaluing assets — particularly property and business interests — which can lead to HMRC enquiries and penalties
- Missing the inheritance tax payment deadline, resulting in unnecessary interest charges
- Failing to claim Business Property Relief or Agricultural Property Relief on qualifying assets
- Not accounting for gifts made within seven years of death
We will ensure that every available inheritance tax relief is claimed and that the inheritance tax return is submitted accurately and on time.
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Frequently Asked Questions About Inheritance Tax
Does everyone pay inheritance tax?
No. Inheritance tax only applies where the value of the estate exceeds the available nil-rate band. With the residence nil-rate band and the transferable nil-rate band, many estates — particularly those passing between spouses — will have no inheritance tax liability at all.
What assets are included in the inheritance tax calculation?
All assets owned by the deceased at the date of death are included, including property, bank accounts, investments, personal possessions and business interests. Certain jointly owned assets and assets held in trust may also be included depending on the circumstances.
Are gifts subject to inheritance tax?
Gifts made within seven years of death may be included in the inheritance tax calculation — known as potentially exempt transfers. The amount of inheritance tax attributable to those gifts tapers off the longer ago they were made under the taper relief rules.
What if I cannot pay the inheritance tax on time?
HMRC will charge interest on any unpaid inheritance tax from the due date. If you are concerned about meeting the inheritance tax deadline, please contact us as soon as possible — there are usually practical solutions available.
Do I need a solicitor to deal with inheritance tax?
There is no legal requirement to use a solicitor. However, the inheritance tax return — HMRC’s IHT400 form and its various schedules — is complex, and errors can result in penalties. We regularly handle inheritance tax returns on behalf of executors and ensure that every available exemption and relief is properly claimed.
Speak to Simon Jenkins and the Team Today
If you have questions about inheritance tax or need help with a probate matter, call us free on 0800 214 216 for a confidential conversation with no obligation. Alternatively, email [email protected] or complete our online enquiry form and we will call you back the same day.
Curtis Legal Ltd is authorised and regulated by the Solicitors Regulation Authority. SRA Number: 450129.
Simon Jenkins has over 30 years of experience in probate, estate administration, medical negligence and personal injury. All articles on this site are written or reviewed by Simon before publication.
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