Understanding the Inheritance Tax Rate: What You Need to Know as an Executor or Heir

Posted May 4, 2023 by SpotCodes

In the UK, the inheritance tax rates is 40%. However, this rate is only applied to the portion of the estate that exceeds the threshold.

This blog deals with information on the inheritance tax rate in the UK. 

What is inheritance tax?

Inheritance tax in the UK is a tax on the estate of a deceased person. The tax is paid on the value of the estate that exceeds the nil-rate band or threshold. The nil-rate band is the amount of an estate that is exempt from inheritance tax. For 2023–24, the basic threshold in the UK is £325,000. If the estate is above the threshold, then the inheritance tax rate of 40% is applied.

What is the inheritance tax rate in the UK?

In the UK, the inheritance tax rates is 40%. However, this rate is only applied to the portion of the estate that exceeds the threshold. The threshold is currently set at £325,000, but it can be increased to £500,000 if a home is given to children or grandchildren, and any unused threshold can be added to a partner’s limit if married. It’s important to note that some gifts given during one’s lifetime may also be subject to taxation after death, but taper relief may reduce the tax amount. The executor is responsible for paying the tax from the estate funds to HM Revenue and Customs.

How is inheritance tax calculated in the UK?

Inheritance tax in the UK is calculated on the total value of the individual's estate at the time of their death. The estate includes all assets, for instance, property, investments, and personal possessions.

There are certain factors that go into calculating the inheritance tax rates UK, such as the nature of the assets, the relationship between beneficiaries and the deceased, or any previous gifts or transfers made during the individual's lifetime. A financial tax advisor would remain ideal for calculating the amount of inheritance tax in the UK.

The current threshold for inheritance tax in the UK is £325,000. If the value of an individual’s estate is above this threshold, then a 40% tax rate is applied. 

However, there are several conditions under which no inheritance tax will be applied, which are as follows:

If the value of your estate is below the threshold (known as the "nil rate band), which is £325,000,

If the estate value is above the threshold but you leave the exceeding value to your spouse or civil partner,

If the estate value is above the threshold but you leave the exceeding value to a non-profit organization, charitable trust, amateur sports club, etc.

If you make a gift. For gifting someone, you are allowed to gift cash or assets up to £3,000 in a year to not get the value added to your estate thus providing relief from inheritance tax

When do you have to pay inheritance taxes?

Inheritance taxes are paid within the time period of six months from the date of the person’s death. If the taxes are not paid during this time, then HMRC starts charging interest.

The executors have the opportunity to pay certain taxes, for instance, on property, through installments over ten years. Though the outstanding amount of the tax will be charged interest. Additionally, the executors have to ensure that all the installments and interest are paid in case the asset is sold before paying the inheritance tax.

As a smart strategy, executors can use ‘payments on account," which means making payments before they know the exact amount of inheritance tax owed on the estate.


The inheritance tax rate UK is currently 40% above the nil-rate band. The threshold, or "nil rate band," is currently £325,000 in the UK. Inheritance taxes in the UK can be complex, implying that it is beneficial to hire a professional or a financial advisor who provides tailored advice by accurately estimating your estate value and ways to reduce the tax in a legal manner.

Inheritance-tax.co.uk is a trusted tax planner and tax advisor in London. Schedule a free 60-minute online consultation with the experts and get yourself relieved from the complexities of inheritance taxes!

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Tags inheritance tax rate , inheritance tax rates , inheritance tax rates uk , inheritance tax rate uk
Last Updated May 4, 2023