Inheritance Tax Explained for Executors

Inheritance tax (IHT) is a tax on the estate of someone who has died. As executor, you are responsible for calculating whether IHT is due, reporting the estate to HMRC, and ensuring the tax is paid before you can obtain a Grant of Probate. For most estates, IHT is straightforward to assess and no detailed form is required. For larger estates, the process involves a formal HMRC return and careful attention to deadlines.

The nil-rate band: the basic IHT threshold

Every person has a nil-rate band (NRB): the amount their estate can be worth before IHT applies. For 2026, the NRB is £325,000. Estates below this figure pay no IHT. Estates above it pay IHT at 40% on the value over the threshold.

The NRB has been frozen at £325,000 since 2009, and the freeze is set to continue until at least April 2030 under current government policy. This means that rising property values are steadily pulling more estates into the IHT net.

The residence nil-rate band

A second allowance, called the residence nil-rate band (RNRB), applies when a residential property passes to direct descendants: children, grandchildren, or step-children. The RNRB is £175,000 per person.

Combined with the standard NRB, a single person can potentially pass on up to £500,000 free of IHT, provided they own a qualifying residential property and leave it to direct descendants.

The RNRB is tapered for estates worth more than £2,000,000. For every £2 the net estate exceeds £2,000,000, the RNRB is reduced by £1. Estates worth more than £2,350,000 receive no RNRB at all.

Transferable nil-rate band for married couples

When one spouse or civil partner dies without using their full NRB (or RNRB), the unused percentage transfers to the surviving spouse. This means a surviving spouse can hold up to two full NRBs and two full RNRBs at the time of their death.

To claim the transferred NRB, you must complete form IHT402 as part of the IHT400 submission, or include evidence with the excepted estate declaration.

Exempt transfers: no IHT regardless of value

Certain transfers are fully exempt from IHT, regardless of their value:

• Spouse or civil partner: assets passing to a UK-domiciled spouse or civil partner are completely exempt.
• Charity: gifts to registered charities are exempt. If 10% or more of the net estate passes to charity, the IHT rate on the remainder reduces to 36%.
• Political parties: gifts to qualifying political parties are exempt.

Excepted estates: when no detailed IHT form is needed

Since January 2022, HMRC simplified the reporting requirements for straightforward estates. Most estates that fall below the IHT threshold are now classed as "excepted estates" and do not require a full IHT return. Instead, executors confirm the estate value and basis for exemption when completing the probate application.

An estate qualifies as excepted if it meets one of these conditions:

• The gross estate (before deducting debts) is below the NRB (£325,000), or below £650,000 if a transferred NRB is available from a deceased spouse or civil partner
• The estate is below £3,000,000 and is wholly exempt because everything passes to a surviving spouse or civil partner or a UK-registered charity
• The deceased was not domiciled in the UK and the UK assets are worth less than £150,000

When the IHT400 is required

If the estate does not qualify as an excepted estate, you must complete form IHT400 and submit it to HMRC before you can apply for probate. The IHT400 is a detailed return covering all assets, liabilities, exemptions, reliefs, and gifts made in the seven years before death. It is accompanied by supplementary schedules depending on what the estate contains.

HMRC will issue a "clearance" letter once they are satisfied the return is correct. You need this (or evidence of payment) before the Probate Registry will grant probate.

For details of the forms involved, see our guide to IHT forms explained.

The IHT payment deadline

IHT must be paid by the end of the sixth month after the month of death. So if the death occurred in March 2026, IHT is due by 30 September 2026. Interest accrues on unpaid IHT from the deadline date at the HMRC late payment rate.

Paying IHT on property in instalments

If IHT is due and the estate includes property, you can elect to pay the tax attributable to that property in ten equal annual instalments rather than in one lump sum. Interest applies on the outstanding balance. If the property is sold before all instalments are paid, the remaining IHT becomes immediately due.

This instalment option can ease cash-flow pressure for estates where much of the value is tied up in property and liquid assets are limited.

Gifts made before death: the seven-year rule

Gifts made during the deceased's lifetime can affect the IHT position of the estate. A gift to an individual is called a "potentially exempt transfer" (PET). If the donor survives seven years after making a PET, the gift falls out of the estate entirely for IHT purposes. If the donor dies within seven years, the gift is brought back into the estate and may attract IHT.

Taper relief reduces the effective rate of IHT on gifts made between three and seven years before death, on a sliding scale. The standard annual gifting exemption of £3,000 per year (which can be carried forward one year if unused) is always exempt regardless of when the donor dies.

As executor, you must account for all gifts made in the seven years before death when completing the IHT return. You should ask family members and review the deceased's bank statements to identify significant gifts.

Related guides

• IHT forms explained
• How to apply for probate
• Probate costs
• Do I need probate?