Inheritance Tax on a house

Inheritance Tax is worked out on everything a person leaves when they die, including their home or their share of it. For the 2026 to 2027 tax year, there's no Inheritance Tax on the first £325,000 of an estate, and that can rise to £500,000 when a home goes to children or grandchildren. Anything above the threshold is taxed at 40%, due by the end of the sixth month after the death. Tax on a house can be paid in 10 yearly instalments, but whatever's still owed becomes due if the house is sold.

This is general information for England and Wales, not legal or tax advice. Estates with trusts, gifts, businesses or farms are more complicated, so speak to a solicitor or tax adviser about a particular estate.

How is a house valued for Inheritance Tax?

The house is valued at what it would have sold for on the open market on the date of death. Any mortgage is a debt of the estate, so it's taken off the estate's value. A professional valuation is worth having, because the same figure is used later as the starting point for any Capital Gains Tax when the house is sold.

If the house was jointly owned, only the share of the person who died counts. GOV.UK says to work it out like this:

How it was owned	The share that counts
Joint tenants with a husband, wife or civil partner	Half the value
Joint tenants with someone else, such as a sibling	The value divided by the number of owners, less 10%
Tenants in common	The person's own share

Inheritance Tax thresholds for 2026 to 2027

What	Amount
Nil-rate band (the standard tax-free threshold)	£325,000
Residence nil-rate band, when a home goes to direct descendants	Up to £175,000
Total threshold with both	Up to £500,000
Residence nil-rate band starts to reduce	Estates worth over £2 million
Rate on the value above the threshold	40%
Reduced rate on some assets if 10% or more of the net estate goes to charity	36%
When the tax is due	By the end of the sixth month after the death
When the full account (form IHT400) is due, if tax is owed	Within 12 months of the death

The residence nil-rate band explained

The residence nil-rate band is an extra tax-free amount of up to £175,000 for a home. It applies when:

• the person died on or after 6 April 2017
• they owned a home, or a share of one, that they lived in at some point (a buy-to-let they never lived in doesn't count)
• the home, or their share of it, goes to their direct descendants: children and grandchildren, including stepchildren, adopted and fostered children, and the husband, wife or civil partner of a direct descendant

The amount is the lower of £175,000 and the value of the share of the home that goes to direct descendants, after any mortgage.

The £2 million taper. For estates worth more than £2 million, the residence nil-rate band goes down by £1 for every £2 above £2 million. A full £175,000 band disappears completely once an estate reaches £2.35 million.

Downsizing. If the person sold their home, or moved somewhere cheaper, on or after 8 July 2015, a "downsizing addition" may still give the estate some of the allowance. HMRC's online calculator works this out.

To claim the band, the executor uses form IHT435 alongside the IHT400, and form IHT436 to claim any unused band from a husband, wife or civil partner who died earlier.

Married couples and civil partners

There's no Inheritance Tax on anything left to a husband, wife or civil partner, including the home. Any unused part of the first partner's thresholds can then be added to the survivor's.

That means that on the second death, an estate could have up to two £325,000 nil-rate bands and two £175,000 residence nil-rate bands: £1 million in total. The residence part only applies if the home goes to direct descendants, and can be reduced if the estate is worth over £2 million.

A worked example

A widowed mother dies in the 2026 to 2027 tax year. Her estate is her house, worth £400,000 with no mortgage, and £200,000 of savings: £600,000 in all.

What happens to the house	Tax-free threshold	Taxable	Inheritance Tax at 40%
Left to her two children, with no allowances to transfer from her late husband	£325,000 + £175,000 = £500,000	£100,000	£40,000
Left to her niece, who isn't a direct descendant	£325,000	£275,000	£110,000
Left to her children, with her late husband's unused allowances transferred in full	£1,000,000	£0	£0

When does Inheritance Tax have to be paid?

The tax must be paid by the end of the sixth month after the death. For example, if someone dies in January, the tax is due by 31 July. HMRC charges interest on anything paid after that.

You usually need to pay at least some of the tax before the grant of probate can be issued. The money can come from the deceased's bank, savings or investment accounts. The full account of the estate (form IHT400) must be sent within 12 months of the death if tax is owed.

Some estates don't need a full account at all. GOV.UK says an estate is usually "excepted" if, for example:

• its value is below the £325,000 threshold
• it's worth £650,000 or less and unused threshold is being transferred from a husband, wife or civil partner who died first
• everything was left to a husband, wife or civil partner living in the UK, or to a qualifying charity, and the estate is worth less than £3 million

Paying Inheritance Tax on a house in instalments

Tax on a house, or other land and buildings, can be paid in 10 yearly instalments, as long as the property isn't sold. You choose this on form IHT400.

• The first instalment is due at the end of the sixth month after the death, then on the same date each year.
• Interest is usually charged on the tax still owed, and on any instalment paid late.
• If the house is sold, all the tax still owed must be paid straight away.
• You can pay off the rest early by asking HMRC for a final assessment.

Selling the house to pay Inheritance Tax

There's a catch in the timing. The tax, or the first instalment, usually has to be paid before probate is granted, but the house can't be sold until probate is granted. Ways round this include paying from the deceased's accounts, paying just the first instalment, or borrowing and repaying the loan when the house sells. The house can be valued and marketed while you wait, so a buyer can be lined up.

How you sell depends on what matters most to the estate:

• An estate agent usually gets the highest price for a house in reasonable condition, but a sale can take several months after the grant, and the estate pays the bills while it waits.
• An auction sets a fixed timescale and can suit houses that need a lot of work, but there are fees and the price isn't certain.
• A cash house buyer can complete quickly and buy the house as it is. Cash buyers, including us, pay below market value, so the estate gives up some of the price for speed and certainty.

Whichever route you choose, remember that once the house is sold, any Inheritance Tax still being paid by instalments becomes due.

If the house sells for less than its probate value

If the house sells for less than it was valued at for Inheritance Tax, the person liable for the tax may be able to claim relief using form IHT38. GOV.UK says the sale usually has to be within 3 years of the death, although some sales within 4 years can qualify. If the claim succeeds, the sale price replaces the probate value and the tax is recalculated. The relief only helps if Inheritance Tax was payable on the house.

If it sells for more than the probate value, Capital Gains Tax may be due on the rise. See Capital Gains Tax on inherited property.

Giving a house away before death

A home given away during someone's lifetime is a gift for Inheritance Tax. GOV.UK says there's normally no Inheritance Tax to pay if the person giving it moves out and lives for another 7 years.

If they keep living in the house, or keep benefiting from it, it's still counted as part of their estate when they die, unless they pay a market rent and their share of the bills. A gift of a house can also have Capital Gains Tax effects, because a gift to anyone other than a husband, wife, civil partner or charity counts as a disposal at market value. Take legal advice before giving away a home.

Pensions from April 2027

From 6 April 2027, most unused pension funds and death benefits will come into the scope of Inheritance Tax, and executors will be responsible for reporting and paying any tax on them. For some families, that could mean an estate that's below the thresholds today will owe tax in future, particularly where there are large pension savings.

Who deals with it?

The executor (or administrator, if there's no will) values the estate, reports to HMRC and pays any tax from the estate. Beneficiaries don't normally pay Inheritance Tax on what they inherit. If you're sorting out a parent's home, selling an inherited house takes you through probate and the sale step by step.