Inheritance tax is charged at 40% on whatever an estate is worth above its tax-free allowances, and nothing is due below them. Everyone has a £325,000 nil-rate band, frozen until April 2031. A further £175,000 residence nil-rate band applies only where a home passes to children or grandchildren, and it tapers away above a £2,000,000 estate.
The rule people miss is transfer between spouses. When the first of a couple dies leaving everything to the other, their unused percentage of both bands carries over — which is how a couple with a qualifying home can pass on up to £1,000,000 before any tax is due.
From 6 April 2027 unused pension funds count towards the estate for the first time. The heavier consequence is who has to deal with it: after consulting on making pension schemes liable, HMRC reversed course, so it is the executor who must contact every scheme for a date-of-death value, apportion the nil-rate band across each one, and report and pay. Executors are jointly and severally liable with the beneficiaries for what is reported.
The deadlines are two different dates and confusing them is expensive. The tax itself is due six months after the end of the month of death, with interest running after that and probate not granted until it is paid. The IHT400 account is due at twelve months.
£325,000 per person. A further £175,000 residence nil-rate band applies if a home passes to children or grandchildren, and a surviving spouse can inherit their partner's unused bands — so a couple can pass on up to £1,000,000 where a qualifying home is involved. Above the allowances the rate is 40%.
From 6 April 2027, yes. Most unused pension funds and death benefits will form part of the estate for inheritance tax. Death-in-service benefits from a registered scheme and dependants' scheme pensions stay outside it.
The executors. HMRC consulted on making pension scheme administrators liable and then reversed that decision, so personal representatives must obtain a value from each scheme, apportion the nil-rate band across the estate and each pension, and report and pay. They are jointly and severally liable with the beneficiaries.
Payment is due by the end of the sixth month after the month of death, and interest runs after that. The IHT400 account itself is due within twelve months. The money is due at six months, the paperwork at twelve.
Gifts made in the seven years before death are brought back into the estate and use up the nil-rate band first, oldest first. Taper relief then reduces the tax — not the gift — on a sliding scale: 20% off at three to four years, 40% at four to five, 60% at five to six, 80% at six to seven, and nothing chargeable after seven years.
It applies the 2026/27 rules, including both nil-rate bands and their transfer, the residence band taper, business and agricultural relief, the reduced 36% charity rate and the April 2027 pension change. It does not cover trusts, foreign assets, gifts with reservation of benefit, or estates where the person was not long-term UK resident. It is an estimate, not tax advice.
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