Inheritance Tax in the UK: What Your Will Needs to Get Right

Inheritance tax (IHT) is often described as a voluntary tax — because with the right planning, many estates can reduce or eliminate their liability. But without any planning at all, the tax bill can come as a shock to executors and beneficiaries alike. Your will is one of the key tools available to manage it.

The Nil Rate Band: The £325,000 Threshold

Every individual has a nil rate band of £325,000 — the amount of their estate that is exempt from inheritance tax. Above this threshold, the standard IHT rate is 40%. This threshold has been frozen since 2009 and is set to remain frozen until at least 2030, meaning more estates are pulled into the IHT net each year as property values rise.

You can check whether your estate is likely to be affected by using the HMRC inheritance tax guidance and estate valuation tools on gov.uk.

The Residence Nil Rate Band

An additional residence nil rate band (RNRB) of up to £175,000 applies where the family home is left to direct descendants — children, grandchildren, or step-children. This means a single person leaving their home to their children may have a combined threshold of £500,000 before IHT applies. For a married couple, the combined allowance can reach £1 million.

However, the RNRB begins to taper off for estates over £2 million, reducing by £1 for every £2 above that figure. For larger estates, specialist advice is recommended.

The Spouse and Civil Partner Exemption

Assets passed to a spouse or civil partner on death are entirely exempt from inheritance tax, regardless of value. This is the spousal exemption — one of the most powerful IHT reliefs available. It also means that any unused nil rate band can be transferred to the surviving spouse, potentially doubling the threshold on the second death.

This exemption does not apply to unmarried partners, regardless of the length of the relationship. It is one more reason why mirror wills for unmarried couples are so important — they direct assets as intended, but the IHT exemption itself is not available without legal marriage or a civil partnership.

The 7-Year Rule on Gifts

Gifts made more than seven years before death are generally exempt from inheritance tax. Gifts made within seven years may be taxable — on a sliding scale known as taper relief — depending on when they were made and whether the total value exceeds the nil rate band. This is why some people begin estate planning well before they expect to need a will.

How Your Will Handles Inheritance Tax

Every will generated by Wills Assured includes an explicit clause directing executors to pay all inheritance tax, duties, and liabilities arising on death from the residuary estate before distribution to beneficiaries. This ensures there is no ambiguity about who is responsible for the tax bill and that it is settled before assets are distributed — protecting beneficiaries from unexpected demands.

For estates where IHT planning is a significant consideration — involving trusts, business property relief, or agricultural property relief — a Law Society accredited wills and probate solicitor can provide tailored advice beyond the scope of a standard will.