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Inheritance tax threshold on a house: the residence nil-rate band and worked examples

Inheritance tax threshold on a house explained: the £325,000 band, the £175,000 residence nil-rate band, the taper above £2 million and worked examples.

4 min read
Last reviewed 4 November 2026
By Your Property Check team

Part 1 of 7

The thresholds

General information, not advice. We read the GOV.UK pages named below on 4 November 2026. Thresholds and rules can change, including in a Budget, so check GOV.UK before you rely on them.

GOV.UK says there is normally no Inheritance Tax to pay if the estate is below the £325,000 threshold, and the standard rate is 40% on the part above it. HMRC's rates page lists the nil-rate band at £325,000 for the period from 6 April 2009 to 5 April 2031. The residence nil-rate band is listed at £175,000 for 6 April 2020 to 5 April 2030. Together they give the £500,000 figure GOV.UK quotes.

Part 2 of 7

The residence nil-rate band

The residence nil-rate band applies when a home is left to direct descendants. GOV.UK defines them as children, grandchildren and other lineal descendants, and their spouses or civil partners, including step, adopted and foster children. The home does not have to be named in the will. A home held in a trust where the descendants are not yet entitled at death, for example because they must reach a certain age first, does not qualify.

Two further rules matter:

Unused allowance can pass between spouses and civil partners. GOV.UK says the share not used when the first partner died can be added to the survivor's allowance.
The band is tapered for large estates. For estates over £2 million, the allowance is reduced by £1 for every £2 above that level, according to GOV.UK. Estate value for this test is assets less debts, without deducting reliefs or exemptions.

GOV.UK also mentions a calculation for people who downsized or sold their home. This page does not model it, so take advice if that applies.

Part 3 of 7

Worked examples

We computed these with our inheritance tax code, which uses the figures above. They assume a single estate in England, no gifts in the previous seven years, no trusts and no charity bequest.

Estate	Thresholds used	Taxable estate	Tax at 40%
£300,000, home worth £300,000 to children	£325,000 plus £175,000	£0	£0
£600,000, home worth £400,000 to children	£325,000 plus £175,000	£100,000	£40,000
£600,000, home left to someone who is not a descendant	£325,000 only	£275,000	£110,000
£1,000,000, home worth £500,000 to children, with a late spouse's full allowances	£650,000 plus £350,000	£0	£0
£2,300,000, home worth £800,000 to children	£325,000 plus £25,000 after the taper	£1,950,000	£780,000

In the last row the estate is £300,000 over £2 million, so the residence band falls by £150,000, from £175,000 to £25,000. The cap on the residence band is the lower of the band and the value of the home passing to descendants, which is why the home's value matters in the second row.

Part 4 of 7

Who pays, and when

Many people assume the tax is charged on the house alone. It is charged on the whole estate, which GOV.UK describes as assets less debts, and the house is usually the largest part of it. That is why the value of the home matters twice: it counts towards the estate, and it caps the residence band.

The estate pays the tax, not the buyer of the house. GOV.UK says that if tax is due, you must report the value on form IHT400 within 12 months of the death, and you cannot apply for probate until you have done so. To avoid interest, pay by the end of the sixth month after the person dies. You normally need to start paying before probate is granted. GOV.UK also says that, if at least 10% of the net estate is left to charity, a reduced 36% rate applies on some assets.

Part 5 of 7

Selling the house after a death

GOV.UK's probate guidance says you should not make financial plans or put property on the market until you have probate. The probate pages we read are for England and Wales, so check the Scottish and Northern Irish routes separately. Our articles on selling a house in probate and deeds of variation cover the next steps, and the selling an inherited property guide compares your options.

Part 6 of 7

What the numbers do not include

Our examples ignore several things that can change the answer. Gifts made in the seven years before death, trusts, business or agricultural relief and the downsizing addition are not modelled. Leaving at least 10% of the net estate to charity can cut the rate to 36% on some assets, as GOV.UK explains. If any of these apply, the real figure could be higher or lower, so treat the table as a way to learn how the bands fit together.

Part 7 of 7

Check your own position

Try the inheritance tax checker with your own figures. Because gifts, trusts and reliefs change the result, ask a probate solicitor or accountant to confirm any real calculation.

This page is general information, not advice.

Our take

The home is usually the biggest number

Our view: people think of inheritance tax as a bill on the house, but it is charged on the whole estate, and the house is usually its largest part. Our worked examples show how far the answer swings: on the same £600,000 estate, tax is £40,000 if the home goes to children and £110,000 if it does not. Gifts, trusts and reliefs are not modelled, so check with a probate solicitor.

Your Property Check adds the property side. Our free house value check gives an honest value range from real HM Land Registry sold prices in your postcode, with the comparable sales and the working shown, as a starting point for what the home may count for.

Check my value

Our opinion, drawn from the facts on this page: not advice and not a forecast. We earn from OfferCheck reports and from introducing sellers to cash buyers, so weigh it with that in mind (see our disclosure). We are not authorised or regulated by the FCA.

Questions, answered

Frequently asked questions

What is the inheritance tax threshold?

GOV.UK says it is £325,000. The threshold can rise to £500,000 if you leave your home to children or grandchildren. Tax is 40% on the value above the allowance.

What is the residence nil-rate band?

It is an extra allowance, listed at £175,000 for 6 April 2020 to 5 April 2030, when a home passes to direct descendants. GOV.UK says it can be added to the £325,000 band, and an unused share can pass to a surviving spouse.

When is the residence nil-rate band tapered?

GOV.UK says that for estates over £2 million it is reduced by £1 for every £2 above that level. On our figures an estate of £2.3 million loses £150,000 of the £175,000 band.

Who pays inheritance tax and when?

The estate pays. GOV.UK says to report the value on form IHT400 within 12 months and to pay by the end of the sixth month after death to avoid interest. You cannot apply for probate until the report is made.

Are the thresholds going to change?

HMRC's rates page lists the nil-rate band to 5 April 2031 and the residence nil-rate band to 5 April 2030. A Budget can change that, so check GOV.UK for the current figures before you plan around them.

Where this comes from

Sources

Last reviewed 4 November 2026 by the Your Property Check team. This page is general information, not legal, tax or financial advice. For your own situation, speak to a conveyancing solicitor or another qualified professional.