Inheritance tax can be a challenging topic to think about, especially if you’re making plans for the future. The truth is that over 95% of us will never need to pay inheritance tax, but this blog takes a look at recent changes for those who might. 

What is inheritance tax? 

Inheritance tax is a tax on the estate – including the property, money and possessions – of someone who’s died. 

There is usually no inheritance tax to pay if either: 

• your estate value is below the £325,000 threshold 
• you leave everything over the £325,000 threshold to your spouse, civil partner, a charity or community amateur sports club 

The standard inheritance tax is 40%. 

How much can be inherited without paying taxes? 

For the 2024/2025 tax year, inheritance tax isn’t due on the first £325,000 of an estate. This sum is known as the Nil-rate Band (NRB). Anything above that limit is subject to the standard rate of 40%.   

If you are married or in a civil partnership, the unused portion of that limit can transfer to your surviving partner, doubling the tax-free threshold to £650,000 for you as a couple. 

The Residence Nil-Rate Band (RNRB) is an additional allowance that helps families pass on their home to their direct descendants (children and grandchildren). The RNRB is set at £175,000 per person, so a single person can inherit up to £500,000 tax-free (£325,000 + £175,000) or £1 million for married couples or civil partners. These tax rates are frozen until 2030. 

What changed in 2024? 

One change in 2024 aims to make the reporting process simpler for smaller estates. Estates under £3 million now enjoy a less complex system of reporting.  

Another change is that as of April 2026, while businesses and farming assets valued at less than £1 million will still not be liable for inheritance tax, those worth more than £1 million will receive 50% relief, meaning they will pay 20% rather than 40%. 

Looking further into the future, as of 2027, pensions will be included in a person’s total estate. This is currently not the case.  

Ways to reduce inheritance tax 

Remember that for the majority of estates, inheritance tax won’t be an issue. If left to direct descendants – children (including adopted, foster or stepchildren) or grandchildren, there will be no inheritance tax, as long as the total value is less than £500,000. 

If you are concerned about inheritance tax, there are ways to reduce it, for example, by gifting assets or setting up a trust.  

It’s always a good idea to talk to a financial professional to strategise for the future. A qualified, experienced adviser will be able to help you navigate the complexities of inheritance tax. You will find comfort in knowing that your family will be cared for even after you’re gone. Contact one of our advisers for more information on how you can plan now for your loved one’s future.