Understanding Inheritance Tax in the UK

A Comprehensive Guide

What Is Inheritance Tax?

Inheritance tax (IHT) is a tax imposed on the estate of a deceased individual. The tax is levied on the total value of assets and possessions left behind, including property, money, investments, and personal belongings. In the UK, inheritance tax is primarily governed by the Inheritance Tax Act 1984.

Who Pays Inheritance Tax?

Inheritance tax is typically paid by the executor or administrator of the deceased person's estate. However, it's essential to understand who is subject to this tax:

Inheritance Tax Thresholds

In the UK, inheritance tax is not levied on all estates. There are specific thresholds and exemptions to consider:

How Is Inheritance Tax Calculated?

Inheritance tax is calculated as a percentage of the taxable estate value exceeding the available thresholds and allowances. The standard inheritance tax rate is 40%, but it can be reduced to 36% if at least 10% of the estate's net value is left to charity.

Here's a simplified formula to calculate inheritance tax:

Taxable Estate Value - (Nil-Rate Band + RNRB + Other Deductions) x Tax Rate = Inheritance Tax Owed

Strategies to Mitigate Inheritance Tax

There are legal methods to reduce or eliminate the impact of inheritance tax. These include:


Inheritance tax in the UK is a tax levied on the estate of a deceased person. It's essential to understand the thresholds, allowances, and potential strategies to mitigate its impact. Effective estate planning can help ensure that your assets are passed on to your loved ones as efficiently as possible while minimizing tax liabilities.