Inheritance Tax & Probate UK: Thresholds & Process

Overview

Inheritance Tax is a charge that can apply to the value of a person's estate when they die. The estate includes things like the family home, savings, investments, vehicles, personal belongings, and in some cases gifts made in the years before death.

Whether any tax is actually due depends on the total value of what has been left behind and who is inheriting it. There is a tax-free threshold known as the nil rate band. Estates valued below this figure generally pay no IHT at all.

Where the estate sits above the threshold, tax is typically charged at a set rate on the portion above it. Transfers between spouses and civil partners are usually exempt, and gifts to registered charities are treated generously. An additional allowance, often called the residence nil rate band, may be available where a main home is passed to direct descendants. Because thresholds and rates can change, always check the current figures on gov.uk before making calculations.

Key steps

1. Register the death and locate the will. Registration is usually done within a few days at the local register office, either in person, by phone, or online depending on the area. At the same time, track down the most recent will, since this identifies the executors and sets out who inherits what. If there is no will, the intestacy rules decide who can apply to administer the estate.
2. Identify assets, debts, and lifetime gifts. Build a complete picture of what the deceased owned and owed at the date of death. This means contacting banks, pension providers, insurers, mortgage lenders, and utility companies, and checking paperwork for property, shares, and business interests. Significant gifts made in the seven years before death may also need to be factored in when calculating the taxable estate.
3. Value the estate accurately. Each asset needs a realistic value as at the date of death, not a rough estimate. Property usually requires a formal or professional valuation, while items such as jewellery, vehicles, and collections may need specialist input. Debts, funeral costs, and certain liabilities can be deducted. Getting this right matters, because HMRC can challenge undervaluations and executors can be held personally responsible for errors.
4. Report to HMRC and pay any tax due. Executors must report the estate's value to HMRC using the appropriate account form, even where no tax is payable. If IHT is owed, at least some of it generally needs to be settled before a Grant of Probate can be issued. HMRC offers an instalment option for certain assets like property, but interest may accrue on unpaid amounts, so check the current rules on gov.uk.
5. Apply for the Grant and distribute the estate. Once HMRC has been dealt with, executors apply to the Probate Registry for a Grant of Probate (or Letters of Administration if there is no will). The Grant proves legal authority to collect in assets, settle remaining debts, and pay beneficiaries. Executors should keep detailed accounts throughout and only distribute once they are satisfied all liabilities have been addressed.

Common questions