Inheritance Tax basics: the £325,000 threshold, gifts and the 7 year rule
Published · 3 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Most estates in the UK do not pay Inheritance Tax. This guide explains the main threshold, the higher threshold for a home passed to children, how gifts are treated and when tax is reported and paid.
What Inheritance Tax is
Inheritance Tax is a tax on the estate of someone who has died. The estate means their money, property and possessions, less debts. It is paid by the person dealing with the estate (the executor or administrator) out of the estate's funds. Beneficiaries do not normally pay tax on what they receive.
The thresholds
As of 11 October 2026, GOV.UK says an estate normally pays no Inheritance Tax if its value is below £325,000. Tax of 40% is charged only on the part above the threshold.
The threshold can rise to £500,000 where a home is left to children, including adopted, foster and stepchildren, or to grandchildren. GOV.UK also says that an estate leaving 10% or more of its net value to charity can pay a reduced rate of 36% on some assets.
Anything left to a husband, wife or civil partner is normally exempt. Any unused threshold can be added to the surviving partner's own threshold.
Gifts and the 7 year rule
Giving things away during life can reduce an estate. GOV.UK says no Inheritance Tax is due on gifts if the giver lives for 7 years after making them, unless the gift is part of a trust.
If the giver dies within 7 years and tax is due, the rate depends on timing. Gifts made within 3 years of death are taxed at 40%. For gifts made 3 to 7 years before death, a sliding scale called taper relief can apply:
- 3 to 4 years: 32%
- 4 to 5 years: 24%
- 5 to 6 years: 16%
- 6 to 7 years: 8%
Taper relief only matters where total gifts in those 7 years are above the £325,000 threshold.
Gifts that are exempt
- Up to £3,000 each tax year in total (an unused amount can be carried forward for one year only)
- Any number of small gifts of up to £250 per person, as long as another allowance is not used on the same person
- Wedding or civil partnership gifts: up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, or £1,000 to anyone else
- Regular gifts from income, with no set limit, if the giver can afford them after usual living costs
Reporting and paying
GOV.UK says that if an estate owes Inheritance Tax, its value must be reported within one year, using form IHT400, and probate cannot be applied for until that is done. Payment normally has to be started before probate is granted. Tax paid after the end of the sixth month after the death normally attracts interest. Even below the threshold, an estate may still need to be reported to HMRC.
If you are dealing with a death, free and impartial help is available from Citizens Advice and MoneyHelper.
Check before you act
Thresholds, rates and reporting rules can change, and individual cases vary. It is worth confirming the details on the official pages linked below.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
