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Generic Tax Name Capital tax - Inheritance tax
Tax name in the national language Inheritance tax
Tax name in English Inheritance tax
Member State UK-United Kingdom
Tax in force since 1986/03/17
If abolished, date on which the tax ceases to apply
Business version date 2015/01/01
Version date 2015/02/17
This file was last updated on

Type of tax
Direct taxes Personal income tax
Corporate income tax

Indirect taxes VAT
Excise duty (EU harmonised)
Alcoholic beverages
Energy products and electricity
Manufactured tobacco

Social security contribution Employers
Legal base

Who sets
The tax rate is set by

The tax base is set by

The reliefs are set by



Geographical Scope



The transferor is primarily liable for the tax on any lifetime transfers which are chargeable when made.

The trustees of a settlement are liable for any tax arising from the transfer of settled property.

The transferee is primarily liable for any tax arising from a PET (see “Tax Object” below) which becomes chargeable by reason of the death of the transferor.

The legal personal representatives are primarily liable for the tax attributable to property in the deceased's estate transferred by his/her will or intestacy or by survivorship.

Note: Liability for tax on a transfer may rest with more than one person - for example, if tax payable on a transfer is not paid by the due date, it may be recovered from the transferee.

Tax object and basis of assessment

The main charge arises on transfers made by an individual on death, by will or intestacy, lifetime gifts made into trusts and other lifetime gifts made within seven years of death. There is no immediate charge on outright lifetime gifts between individuals (and gifts into trusts for the disabled) and these become exempt from tax provided the transferor survives seven years from the date of the gift. During the seven-year period these gifts are known as potentially exempt transfers (PETs). Special rules apply where property is given subject to a reservation (i.e. where the transferee does not enjoy it to the entire exclusion of the transferor). If the reservation ceases during the transferor's lifetime the gift is treated as a PET made by that person at that date. If the reservation continues until the transferor's death the property is treated for inheritance tax purposes as forming part of the transferor's estate at death.

The tax also applies to transfers by close companies. Special provisions govern the taxation of property held in settlement, which provide for a ten-yearly inheritance tax charge on the property held in trust as well as a charge on assets taken out of the settlement.

All property in the United Kingdom is within the scope of inheritance tax, regardless of the domicile of the transferor; property outside the United Kingdom is also liable to the tax if the transferor is domiciled within the United Kingdom at the time of the transfer, or if certain statutory rules impose a deemed United Kingdom domicile on the taxpayer. Settled property outside the United Kingdom is chargeable to tax if the settler was domiciled in the United Kingdom at the time when the property was settled.

The loss to the transferor is broadly the difference between the value of all the transferor's property immediately before the transfer and its value immediately after the transfer. Thus, if the transferor pays any tax due on a lifetime transfer, inheritance tax is charged on the total of the gift and tax. On death, the charge extends to the value of the deceased's estate.

Deductions, Allowances, Credits, Exemptions


These include:

  • Full exemption for transfers between spouses and civil partners (but limited to GBP325,000  with effect from 6 April 2013, where the transferor is domiciled in the UK but the transferee is domiciled outside the United Kingdom)
  • The first GBP 3,000 of a transferor's total of lifetime gifts in a tax year
  • Gifts a transferor makes to any transferee which in any tax year do not exceed GBP 250 per person
  • Gifts out of income, provided certain conditions are fulfilled
  • Certain dispositions for the maintenance of the family
  • Certain government securities if the holder is not ordinarily resident in the United Kingdom
  • Transfers to eligible charities, political parties, national institutions, and of land to eligible housing associations

There are also heritage exemptions, conditional on certain undertakings being secured to maintain, preserve and provide reasonable public access to the property, for:

  • Buildings of outstanding historic or architectural interest (including surrounding land essential for the protection of the character and amenity of such buildings) and their historically associated contents
  • Land of outstanding scenic, historic or scientific interest
  • Objects which are of pre-eminent national, scientific, historic or artistic interest

Maintenance funds established to maintain and preserve certain heritage property also benefit from certain tax breaks.


From 9th October 2007, it is possible for spouses and civil partners to transfer their nil-rate band allowances so that any part of the nil-rate band that was unused when the first spouse or civil partner died (for example, because one or more of the available IHT exemptions then applied) can be transferred to the surviving spouse or civil partner for use on their death. This measure was legislated in the Finance Act 2008.

Rate(s) Structure

There is a nil-rate band (currently GBP 325,0001) below which no tax is payable.  

Tax is charged on value of the deceased’s estate above the nil rate band threshold at a single rate of 40%2.

Tax is also charged on certain lifetime transfers above the threshold and other events, for example when assets are transferred into or out of a trust, and on assets held in trusts. Chargeable lifetime transfers are usually taxable at 20% but the rate can vary depending on the nature of the transfer3.


1 The nil-rate band was set at GBP 325,000 in April 2009 and was frozen at that level in April 2010 up to and including 2014-15. The Government will extend the freeze on the Inheritance Tax (IHT) nil-rate band of £325,000 from 6th April 2015 until 2017-18. It will then increase in line with CPI inflation from 6 April 2018. This forms part of the package to fund a cap on reasonable care costs of £75,000 for older people from April 2017.

 For deaths on or after 6 April 2012, a lower rate of IHT of 36 per cent applies where 10 per cent or more of a deceased person’s net estate is left to charity.

3 Tax is charged at each tenth anniversary of the trust on the net value of any ‘relevant property’ in the trust and on assets taken out of a trust up to a maximum rate of 6%. The calculation of the charge is complicated and will vary depending on the type of trust and circumstances.


Reduced Rate for Charitable Donations

As announced at Budget 2011, for deaths on or after 6 April 2012, a lower rate of IHT of 36 per cent is available where 10 per cent or more of a deceased person’s net estate (less the nil rate band and any other relief or excemption) is left to charity.

Tax due date

Tax is, in most circumstances, due six months after the end of the month in which the taxable event occurs. However, tax on certain types of property (including, for example, houses, land, certain business assets and certain holdings of unquoted securities) may be paid by instalments over 10 years, in some cases free from interest.

In other cases, interest is chargeable after a due date at a rate, currently 3%, which may vary from time to time.

Tax collector

HM Revenue and Customs

Special features


These include:

  • Reliefs (usually at 100%) from the inheritance tax charge on qualifying agricultural property businesses, unquoted shares, woodlands and trusts for the benefit of employees
  • Reliefs from the inheritance tax charge on death for any loss in value on the sale of quoted securities and immovable property (land and buildings), within one year and four years respectively following the date of death
  • Relief for taxpaying transfers on the same property occurring in quick succession

A tapering relief applies (to the amount of any tax payable) for failed PETs where the transfers are made more than three years but less than seven years before death. Those lifetimes transfers which are chargeable when made are taxable at half the death rate (i.e. 20% for any value above the nil-rate band).

There is a measure of unilateral relief for tax paid in other countries in respect of the same transfer of property that is liable to UK inheritance tax; relief from double taxation is also available where there is an appropriate double taxation convention.

Economic function

Environmental taxes

Tax revenue
ESA95 code d91aa

Annual tax revenue (millions)
Tax revenue as % of GDP
Tax revenue as % of total tax revenue
2012 3,077.00 GBP 0.18
2011 2,898.00 GBP 0.18
2010 2,632.00 GBP 0.17
2009 2,343.00 GBP 0.16
2008 3,169.00 GBP 0.21
2007 3,804.00 GBP 0.26
2006 3,507.00 GBP 0.25
2005 3,134.00 GBP 0.24
2004 2,861.00 GBP 0.23
2003 2,400.00 GBP 0.20
2002 2,364.00 GBP 0.21
2001 2,374.00 GBP 0.22
2000 2,203.00 GBP 0.21