Kirk Rice Blog

Inheritance Tax Explained: How Much You May Pay and How It’s CalculatedWritten on March 26, 2026 by Michael Powell

Key Points

• Inheritance tax is typically charged at 40% on the value of an estate above available thresholds, but the actual amount can be affected by reliefs and exemptions.
• The amount in larger estates may also be affected by what the deceased did with assets during the last 14 years of their lifetime.
• The inheritance tax threshold is currently £325,000 per person, with potential of up to another £175,000 additional allowance when passing on a home to a legally defined descendant(s).
• Timing matters, as inheritance tax is due six months after death and an arrangement with HMRC to pay in place before probate is granted. Without probate an estate cannot be distributed.
• Property is included within an estate and can significantly increase the likelihood of an inheritance tax liability.

How much inheritance tax will I pay and how is it calculated?

Inheritance tax is usually charged at 40% on the value of an estate above the available thresholds.

The calculation starts with the total value of the estate, including property, savings, investments, and possessions. Debts and liabilities are deducted, along with any available reliefs. The remaining amount is then assessed against the inheritance tax threshold, with tax applied to anything above it.

In some cases, a reduced rate of 36% may apply where at least 10% of the estate is left to charity.

The final amount payable depends on how assets are held and whether any reliefs apply, which means similarly valued estates can result in different tax outcomes.

What is the inheritance tax threshold?

The standard inheritance tax threshold is £325,000 per individual.

There may also be an additional allowance when a main residence is passed to direct descendants. Married couples and civil partners can usually combine their allowances, meaning a higher threshold may be available on second death.

Eligibility for additional allowances depends on the structure of the estate and who inherits it.

How much inheritance tax will I pay on £1 million?

The amount of inheritance tax on a £1 million estate depends on the thresholds and reliefs available.

If only the standard £325,000 threshold applies, the remaining £675,000 may be taxed at 40%. Where additional allowances are available, the taxable amount may be lower.

Other factors can influence the outcome, including:

• Reliefs that apply to certain assets
• Gifts made before death
• Whether part of the estate is left to a civil partner, spouse or charity

A headline estate value does not reflect the final tax position without considering these factors.

When is inheritance tax payable?

Inheritance tax is generally due within six months of the end of the month of death.

In many cases, some or all the tax must be paid before probate can be granted. This can create challenges where funds are tied up in property or other illiquid assets.

There are options in some cases to pay inheritance tax in instalments, particularly for property.

Does inheritance tax include property?

Yes, property is usually included as part of the estate for inheritance tax purposes.

This includes the family home as well as any additional property. Given the value of property, it often plays a significant role in whether an estate exceeds the inheritance tax threshold.

Some allowances and reliefs may apply depending on ownership and who inherits the property.

Who pays inheritance tax?

Inheritance tax is typically paid by the executor or administrator of the estate, using funds from the estate.

Beneficiaries usually receive their inheritance after any tax and liabilities have been settled. In some cases, individuals who received gifts in the years before death may also be liable to pay a share of the tax.

When should you take advice on inheritance tax?

It is worth taking advice where:

• The estate is likely to exceed the inheritance tax threshold
• Property makes up a large portion of the estate
• You have undrawn pension funds
• There are multiple beneficiaries or more complex assets
• Gifts have already been made in previous years, and you want to address an imbalance between beneficiaries
• You have remarried and seek to protect the interests of your beneficiaries
• You are in your retirement years and still able to save from your income for the future
• You desire to help someone during your lifetime with a transfer of assets or money
• Part of your estate is held in trust
• You own unlisted company shares
• You do not have a succession plan for your business and other people’s livelihoods depend on you.

Why Kirk Rice for IHT advice?

Kirk Rice supports individuals and families in understanding how inheritance tax may apply to their estate and what factors could affect the outcome.

This can include reviewing the value and structure of your estate, explaining how thresholds and reliefs apply, and helping you plan with greater clarity.

Inheritance tax is not always straightforward, particularly where property, multiple allowances, or prior gifts are involved. Taking advice can help you understand your position and consider your options.

If you would like to discuss your situation, contact info@kirkrice.co.uk

Please note: This article is correct as at the publication date. The answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning.