Inheritance tax on property

Last reviewed 18 August 2026

For most estates the house is both the largest asset and the reason inheritance tax comes into view at all — yet the law gives the home a special allowance the rest of the estate does not enjoy.

The home and the residence band

A main residence counts towards the estate at its market value at the date of death. But where it passes to direct descendants — children, grandchildren and the like — the residence nil-rate band adds up to £175,000 to the ordinary £325,000. With both bands transferable between spouses, a couple can pass on up to £1 million, home included, before tax. The residence band tapers away for estates above £2 million.

Paying the tax, and selling

Inheritance tax on property can be paid in instalments over ten years, which helps where the estate is asset-rich but cash-poor, though interest runs on the outstanding amount (7.75% from 9 January 2026). Value the property at the date of death, and note that a later sale above that value may bring capital gains tax into play. If the tax is heavy, take advice before selling.

Sources. GOV.UK, Inheritance Tax (residence nil-rate band; instalment option); HMRC interest rate 7.75% from 9 January 2026.