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What is Inheritance Tax?
Last verified 31 October 2026
Inheritance Tax is a tax on the value of a person's estate when they die, which includes any let properties they own. The standard threshold is £325,000 and the standard rate is 40%, charged only on the part above the threshold.
Why it matters to landlords
No Inheritance Tax is normally due if the estate is below the threshold, or if everything above it goes to a spouse or civil partner, a charity or a community amateur sports club. Any unused threshold can be added to a surviving partner's threshold. If you give your home to children, stepchildren or grandchildren and the estate is worth less than £2 million, the threshold can increase to £500,000.
Gifts matter too: a person receiving a gift may owe tax if you gave away more than £325,000 and died within 7 years, with taper relief depending on when the gift was made. Giving a property away is also a disposal for Capital Gains Tax.
Example
Margaret dies owning her home worth £400,000 and three let houses worth £600,000, a £1,000,000 estate, and leaves everything to her nephew. The threshold is £325,000, so tax is 40% of £675,000, which is £270,000. Had she left it to her husband, no tax would normally be due.
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