The estate pays, not the people who inherit
Inheritance tax (IHT) is charged on the estate, the property, money and possessions of someone who has died. The executors named in the will, or the administrators if there is no will, work out the bill and pay HMRC from estate funds before assets are distributed. Beneficiaries do not normally pay tax simply for inheriting, although they may later face capital gains tax on a sale, or income tax on income the assets produce. The tax is normally due by the end of the sixth month after the month of death, usually before probate is granted, and HMRC charges interest after that deadline. Tax on hard-to-sell assets such as land, buildings and certain business interests can be spread over 10 annual instalments.
Why most estates pay nothing
The 40% rate applies only to the value above the tax-free allowances. Everyone has a £325,000 nil-rate band, plus a residence nil-rate band of up to £175,000 where a home passes to children or grandchildren. Anything left to a spouse or civil partner who is a UK long-term resident is exempt without limit, and unused allowances transfer to the survivor, so a couple can often pass on up to £1 million with no IHT. Our inheritance tax guide covers the allowances, the 36% charity rate, the taper on larger estates and the 7-year rule on gifts.
Residence now decides how far the tax reaches
Since 6 April 2025 the scope of UK inheritance tax depends on long-term residence rather than domicile. If you have been UK resident in at least 10 of the previous 20 tax years, your worldwide estate is within the charge; otherwise the tax broadly reaches only your UK assets. The status can persist for up to 10 years after you leave the UK, which matters for internationally mobile families. See our residence-based IHT guide.