Tax
Inheritance Tax Threshold: A Complete Guide to Property & IHT
Inheritance Tax (IHT) is charged on an estate above the nil-rate band (a tax-free threshold, long set at £325,000), with an additional residence nil-rate band (up to £175,000) where a home is left to direct descendants. Anything left to a spouse or civil partner is exempt, and unused allowances can transfer between them — so couples can often pass on up to £1 million. IHT is the estate’s liability, settled before beneficiaries inherit.
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- £325kthe nil-rate band
- £175kresidence nil-rate band
- Spouseexempt entirely
- ~£1ma couple can pass on
How the thresholds work
| Allowance | Amount | Applies when |
|---|---|---|
| Nil-rate band | £325,000 | Every estate |
| Residence nil-rate band | Up to £175,000 | Home left to children/grandchildren |
| Spouse exemption | Unlimited | Anything left to a spouse/civil partner |
| Transferable allowances | Unused % passes on | Between spouses/civil partners |
Estate value above the available allowances is taxed at the IHT rate (long set at 40% on the excess). Always confirm current figures on GOV.UK, as thresholds and rules can change.
The residence nil-rate band
The residence nil-rate band (RNRB) is an extra allowance — up to £175,000 per person — that applies specifically when a residence is passed to direct descendants (children, including step and adopted, and grandchildren). It is what allows a married couple to potentially pass on up to £1 million (two nil-rate bands plus two residence nil-rate bands). The RNRB can be reduced for very large estates and has detailed conditions, so it is worth checking how it applies to a particular estate.
The spouse exemption and transferring allowances
Two rules dramatically reduce IHT for couples. First, anything left to a spouse or civil partner is completely exempt from IHT, regardless of value. Second, when the first partner dies, any unused nil-rate band and residence nil-rate band transfer to the survivor, so the second estate can use both. This combination is why married couples and civil partners often pay no IHT until the second death, and then only on value above the combined allowances.
IHT and selling an inherited property
IHT is the estate’s responsibility and is generally dealt with before beneficiaries inherit — often it must be paid (at least in part) before the grant of probate is issued, which can create a timing challenge if the main asset is property. Executors sometimes need to sell or use other estate assets to fund the IHT. This is separate from any Capital Gains Tax a beneficiary might owe later if they sell at a gain above the probate value.
Practical points for executors and families
If you are dealing with an estate, value it accurately (a RICS valuation carries weight with HMRC for property), establish which allowances apply, and take advice on funding any IHT, as the deadline can precede probate. Where the estate needs to raise funds or simply settle quickly, a fast cash sale of the property can help — completing in weeks and ending the holding costs. For higher-value or complex estates, professional advice from a solicitor or tax adviser is strongly recommended. See the inherited-property roadmap.
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Written & reviewed by Lisa Hayes, Founder
Lisa Hayes is the founder of Ready Steady Sell and an independent UK home-selling expert with over a decade helping homeowners weigh cash house buyers, property investors and the wider fast house-sale industry — without pressure or hidden fees. Every guide is reviewed for accuracy under our editorial standards.
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Frequently asked questions
Straight answers, no sales talk
What is the Inheritance Tax threshold?
The nil-rate band has long been £325,000 per person, plus a residence nil-rate band of up to £175,000 where a home passes to direct descendants. Confirm current figures on GOV.UK.
Do I pay Inheritance Tax on a house I inherit?
IHT is paid by the estate before you inherit, not by you directly. You may later owe Capital Gains Tax if you sell the inherited property at a gain above its probate value.
Is property left to a spouse subject to IHT?
No. Anything left to a spouse or civil partner is exempt from Inheritance Tax, and their unused allowances can transfer to the survivor.
Can a couple pass on £1 million tax-free?
Often, yes — two nil-rate bands (£325,000 each) plus two residence nil-rate bands (up to £175,000 each) can total £1 million, where a home passes to descendants.
When is Inheritance Tax due?
IHT is generally due within six months of death, and often must be paid (at least partly) before probate is granted — which can create a timing challenge if property is the main asset.
How can selling a property help with IHT?
Executors sometimes sell property to fund the IHT or settle the estate quickly. A cash sale completes in weeks and ends the holding costs, helping with both timing and cash flow.