2023 Interitance Tax: thresholds and examples

Reviewed on 2 April 2023
Illustration featuring a house and coins

What is Inheritance Tax?

It's a tax on the value of the estate of someone who has died. The estate includes property, money and other possessions (after paying debts and funeral costs).

Inheritance Tax rate

Inheritance Tax is currently charged at 40% but there is a £325,000 tax-free allowance.

Band Estate value Inheritance Tax rate
Tax-free allowance Up to £325,000 0%
Standard rate over £325,000 40%

The tax-free allowance can be increased if you:

  • leave a home to your children or grandchildren
  • transfer the unused allowance from your spouse or civil partner

Extra tax-free allowance if you pass on a home

You could increase your tax-free allowance by up to £175,000 if you leave a home to your children or grandchildren and your estate is worth less than £2 million.

If the property is worth less than £175,000, the extra allowance is capped at the value of the property.

How does Inheritance Tax work for couples?

If you are married or in a civil partnership, you can:

  • leave things to each other without paying Inheritance Tax
  • transfer any unused tax-free allowance to each other
Show sources

HMRC: "Inheritance Tax thresholds and interest rates"

HMRC: "Inheritance Tax nil-rate band and residence nil-rate band thresholds from 6 April 2026 to 5 April 2028"

HMRC: "Inheritance Tax statistics: commentary"

UK Government: "How Inheritance Tax works: thresholds, rules and allowances"

HM Treasury: "Spring Statement 2022"

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