Inheritance Tax
What is Inheritance Tax?
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.
There’s normally no Inheritance Tax to pay if either:
-
the value of your estate is below the £325,000 threshold
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you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club.
The standard Inheritance Tax rate is 40%. The tax is only charged on the part of your estate that’s above the threshold. This example explains how it works:
E.g., Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).
Who pays the Inheritance Tax after someone dies?
Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor’, if there’s a Will).
There are some exceptions that include giving gifts, you can read more on the GOV.UK webpage
Is there a deadline to pay the Inheritance Tax?
Yes, you must pay Inheritance Tax by the end of the sixth month after the person died. For example, if the person died in June, you must pay Inheritance Tax by 31 December.
HMRC will charge you interest if you do not pay by the due date.
How do you pay?
There are several ways you can pay - online banking, at your bank or by cheque. You’ll need to get a payment reference number before you can pay your tax bill. Find out more from this GOV.UK webpage.
Always check your payment has been received
HMRC do not send receipts for payments, however, they will write to tell you when you’ve paid all the Inheritance Tax and interest you owe.
If you’ve paid through your own bank or building society, check your statement to confirm the payment has left your account.
Page last updated: May 2023.
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