Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

Inheritance Tax rates The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

Example Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).

Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor’, if there’s a will). Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will. People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.