Inheritance tax in the UK, explained

Last reviewed 18 August 2026

Of all the reckonings that follow a death, inheritance tax is the one most feared and least understood. It is charged not on every estate but on the portion that exceeds the allowances; for many estates, none is due at all.

“Things as certain as Death and Taxes, can be more firmly believ’d.”Daniel Defoe, The Political History of the Devil, 1726

The bands and the rate

Each individual has a nil-rate band of £325,000. A further residence nil-rate band of up to £175,000 applies where a main home passes to direct descendants. Because allowances are transferable between spouses and civil partners, a couple may pass on up to £1 million before tax. Above the available allowances the rate is 40%. Transfers to a spouse, civil partner or UK charity are exempt.

The change coming in 2027

From 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of the estate for inheritance tax — a significant departure from present practice, enacted by the Finance Act 2026 (Royal Assent 18 March 2026). Personal representatives, not pension administrators, will be responsible for reporting and paying the tax. Death-in-service benefits remain excluded, and spouse and charity exemptions are unaffected.

Sources. GOV.UK, Inheritance Tax; GOV.UK Technical note: Inheritance Tax on pensions (29 May 2026); Finance Act 2026 (Royal Assent 18 March 2026).