Who Pays Inheritance Tax in the UK?

Inheritance Tax (IHT) is a tax applied to the estate (property, money, and possessions) of a person who has passed away. Whether IHT is due depends on the value of the estate and who inherits it.

Who Is Responsible for Paying Inheritance Tax?

1. The Estate Pays IHT Before Distribution

   • The executor of the will (or administrator if there’s no will) is responsible for paying inheritance tax from the estate before distributing assets to beneficiaries.

2. Beneficiaries Usually Don’t Pay IHT

   • If you inherit money, property, or assets from an estate, you don’t normally pay IHT directly—it is deducted before you receive your inheritance.

3. Exceptions – When Beneficiaries Pay IHT

   • If you receive a gift from the deceased within 7 years before their death, you may have to pay taper relief tax if the estate exceeds the tax threshold.
   • Some trusts require beneficiaries to pay IHT when assets are transferred to them.

How Much Is Inheritance Tax?

• No tax is due if the estate is worth less than £325,000 (the nil-rate band).
• If the estate exceeds £325,000, IHT is 40% on the amount above this threshold.
• If the deceased leaves their home to direct descendants (children or grandchildren), the tax-free threshold can increase to £500,000.

Who Doesn’t Have to Pay Inheritance Tax?

✔️ Spouses & Civil Partners – Inherit tax-free.
✔️ Charities & Non-Profit Organisations – Inherit tax-free.
✔️ Estates Below £325,000 – No IHT is due.

How to Reduce Inheritance Tax

✅ Gifting Assets – Giving assets to family at least 7 years before death avoids IHT.
✅ Using Trusts – Placing assets in a trust can protect them from IHT.
✅ Leaving 10% to Charity – Reduces IHT rate from 40% to 36%.
✅ Equity Release & Investments – Certain investments and schemes can lower IHT liability.

How Fraser Bond Can Help

At Fraser Bond, we assist property owners and investors with estate planning, inheritance tax strategies, and wealth protection. Our experts help you minimise IHT legally to protect your assets for future generations. Contact us today for personalised advice on inheritance tax planning.