Inheritance Tax on Savings & Cash

Do you pay inheritance tax on savings?

Only sometimes. Inheritance tax looks at the total value of the estate, not any single account, so savings are taxed only where the whole estate exceeds the available nil-rate bands. The ordinary nil-rate band is £325,000 per person, and tax is charged at 40% on value above the combined bands (gov.uk, as at July 2026, subject to change). Many estates fall within the bands and pay nothing.

How are savings taxed within an estate?

Cash balances are counted at their value on the date of death and added to the rest of the estate. From that total, debts are deducted, the available tax-free bands are applied, and 40% falls on anything above them, or a reduced 36% where at least 10% of the net estate passes to charity (gov.uk, as at July 2026, subject to change). An extra residence nil-rate band of up to £175,000 can apply where a home passes to children or grandchildren, which may raise the point at which savings become taxable.

Allowance or rate	Level (July 2026)
Nil-rate band (per person)	£325,000
Residence nil-rate band	Up to £175,000
Standard rate	40%
Reduced rate (10%+ to charity)	36%
Taper threshold	£2,000,000

Allowance or rate

Level (July 2026)

Nil-rate band (per person)

£325,000

Residence nil-rate band

Up to £175,000

Standard rate

40%

Reduced rate (10%+ to charity)

36%

Taper threshold

£2,000,000

Source: gov.uk/inheritance-tax and gov.uk. These figures are fixed until the end of the 2030-31 tax year (5 April 2031), as at July 2026 and subject to change. See our fuller guide to IHT thresholds and allowances.

Are cash ISAs free of inheritance tax?

An ISA is tax-free for income tax and capital gains tax while you are alive, but that shelter does not extend to inheritance tax. ISA investments form part of the estate for inheritance tax purposes, so a cash ISA is treated like any other savings balance (gov.uk, as at July 2026, subject to change). Whether tax is due still depends on the size of the whole estate and who inherits.

There is one relief for couples. A surviving spouse or civil partner can be granted an extra one-off ISA allowance, sometimes called the additional permitted subscription, equal to the value the deceased held in their ISA when they died, or its value when the ISA is closed (gov.uk, as at July 2026, subject to change). That keeps the money in a tax-free wrapper for the survivor, though it does not change the inheritance tax position itself.

See our wider estate planning guide for how savings sit alongside property and pensions.

Passing savings to a spouse or civil partner

Savings left to a husband, wife or civil partner are generally free of inheritance tax on the first death, however large the balance. Transfers between spouses and civil partners are usually exempt, and any unused nil-rate band can pass to the survivor, so the second estate may carry a larger combined allowance (gov.uk, as at July 2026, subject to change). This is why many couples find that tax on savings, if any, arises only when the second person dies.

A worked example (illustration only). A widower dies with £280,000 in savings and cash ISAs and no other significant assets, leaving everything to his two children. His late wife left everything to him, so her unused band may transfer, giving his estate two nil-rate bands of £325,000 each, up to £650,000 combined (gov.uk, as at July 2026, subject to change). In this illustration the £280,000 of savings could fall within those bands, so no inheritance tax would arise, even though no home is involved and so no residence nil-rate band applies. Change the figures, the marital history or the beneficiaries and the answer changes, so this is general information rather than a calculation for any real estate.

Can you give savings away to reduce inheritance tax?

Giving cash away during your lifetime can reduce the estate, but the rules set limits. Several gifts are exempt straight away: you can give away up to £3,000 in total each tax year under the annual exemption, and any unused annual exemption can be carried forward for one tax year only (gov.uk, rules on giving gifts, as at July 2026, subject to change). You can also make any number of small gifts of up to £250 per person each tax year, provided that person has not also received your annual exemption (gov.uk, as at July 2026, subject to change).

Larger cash gifts are usually potentially exempt transfers, which fall outside the estate only if you survive seven years. Gifts made three to seven years before death may attract taper relief, reducing the tax due on a sliding scale of 32%, 24%, 16% and 8% across those years (gov.uk, as at July 2026, subject to change). Regular gifts paid from surplus income, rather than capital, can also be exempt where they do not affect your usual standard of living (gov.uk, as at July 2026, subject to change). Because these interact with each other, one option some consider is to keep clear records and discuss the position with a qualified professional.

Annual exemption. Up to £3,000 of gifts each tax year, with one year of carry-forward (gov.uk, as at July 2026, subject to change).

Small gifts. Any number of gifts of up to £250 per person each tax year (gov.uk, as at July 2026, subject to change).

Wedding gifts. Up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else (gov.uk, as at July 2026, subject to change).

The seven-year rule. Larger cash gifts may fall outside the estate if you live seven years after making them.

Savings and inheritance tax in Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so the £325,000 nil-rate band and the 40% rate apply to savings across Scotland, England, Wales and Northern Ireland alike (gov.uk, as at July 2026, subject to change). What differs is the surrounding succession law. Scotland has its own rules, including legal rights that can give a spouse and children a fixed share of moveable estate such as cash, and it uses confirmation rather than a grant of probate. Where an estate touches more than one UK nation, it can be worth taking advice in each. For the broader picture, see our estate planning guide.

Frequently asked questions

Do you pay inheritance tax on money in the bank?

Money in bank and building society accounts counts as part of the estate, but tax is due only where the whole estate exceeds the available bands. The ordinary nil-rate band is £325,000 per person, and 40% falls on value above the combined bands (gov.uk, as at July 2026, subject to change). Many estates stay within the bands and pay nothing.

Is a cash ISA subject to inheritance tax?

Generally yes. An ISA is free of income and capital gains tax, but ISA investments form part of the estate for inheritance tax purposes, so a cash ISA is assessed like any other savings (gov.uk, as at July 2026, subject to change). A surviving spouse or civil partner may inherit an extra ISA allowance, though that does not remove any inheritance tax.

How much cash can you inherit tax-free?

There is no separate cash-only figure. The nil-rate band is £325,000 per person, and up to a further £175,000 residence nil-rate band may apply where a home passes to children or grandchildren, taking one threshold to £500,000 and a couple's to up to £1,000,000 (gov.uk, as at July 2026, subject to change). It depends on the whole estate.

Can I give cash away to reduce inheritance tax?

You can. Up to £3,000 of gifts each tax year is exempt under the annual exemption, with one year of carry-forward, and small gifts of up to £250 per person are also exempt (gov.uk, as at July 2026, subject to change). Larger cash gifts may fall outside the estate after seven years. Because the rules interact, many people discuss timing with a qualified professional.

Do savings held jointly pass free of inheritance tax?

It depends who the joint holder is. A joint account often passes to the surviving holder automatically, and transfers between spouses or civil partners are generally exempt from inheritance tax (gov.uk, as at July 2026, subject to change). Where the survivor is not a spouse, the deceased's share can still count as part of the estate, so the answer turns on the arrangement.

Are premium bonds and National Savings caught?

Yes, in the same way as other cash. Premium bonds, National Savings and investment accounts count towards the estate at their value on the date of death and are assessed against the available bands (gov.uk, as at July 2026, subject to change). There is no special exemption for them, so whether tax arises depends on the size of the whole estate and who inherits.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

Inheritance Tax on Cash and Savings