Inheritance Tax on Property: Do You Pay on a House?

Do you pay inheritance tax on a house?

Not automatically. Inheritance tax looks at the value of the whole estate, not any single asset, so a house is taxed only where the total 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 is a property taxed within an estate?

The home is valued at its open-market worth at the date of death and added to the rest of the estate. From that total, debts such as a mortgage are deducted, then 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).

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

The residence nil-rate band

There is an extra allowance aimed squarely at the family home. The residence nil-rate band adds up to £175,000 per person where a home is left to children or grandchildren, including adopted, foster and stepchildren, on top of the ordinary £325,000 band. That can take one person's threshold to £500,000, and a married couple or civil partners may combine both sets to reach up to £1,000,000 (gov.uk, passing on a home, as at July 2026, subject to change).

The extra band is not unlimited. Where the estate is worth more than £2,000,000, the residence nil-rate band reduces by £1 for every £2 above that figure, so larger estates may lose some or all of it (gov.uk, as at July 2026, subject to change). It also generally applies only where the home passes to direct descendants, not to siblings, nieces or nephews.

See our detailed note on the residence nil-rate band for how it is claimed and the downsizing rules.

Passing a home to a spouse or civil partner

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

A worked example (illustration only). A widow dies owning a house worth £450,000 and savings of £120,000, so £570,000 in total, and leaves everything to her two children. Her late husband left everything to her, so his unused bands may transfer. On her death the estate could draw on two nil-rate bands (£325,000 each) and, because the home passes to children, two residence nil-rate bands (£175,000 each), up to £1,000,000 combined (gov.uk, as at July 2026, subject to change). In this illustration the £570,000 estate could fall within those bands, so no tax would arise. Change the figures, the ownership or the beneficiaries and the answer changes, so this is general information rather than a calculation for any real estate.

Can you give your house away to avoid inheritance tax?

Giving the home away is possible, but it rarely works the way people expect if you carry on living there. Where you give a property away but keep the benefit of it, for example continuing to live in it rent-free, it is usually treated as a gift with reservation of benefit and stays inside your estate for inheritance tax (gov.uk, rules on giving gifts, as at July 2026, subject to change). Simply signing the house over to children is often not the shortcut it appears to be.

An outright gift with no strings can fall out of the estate if you survive seven years, and gifts made three to seven years before death may attract taper relief on the tax due (gov.uk, as at July 2026, subject to change). But giving away a home you still live in raises capital gains, care and family-law questions, so it is one option some consider only after taking advice. It can be worth discussing with a solicitor, a STEP practitioner or an accountant before acting.

Gift with reservation. Living in a home you have given away usually keeps it in your estate for tax.

The seven-year rule. An outright gift may fall outside the estate if you live seven years after making it.

Wider costs. Capital gains tax, loss of control, and later-life care all need weighing, not just inheritance tax.

Property and inheritance tax in Scotland and Northern Ireland

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

Frequently asked questions

Do you pay inheritance tax on an inherited house?

Usually the tax, if any, is settled by the estate before you receive anything, rather than charged to you as the person inheriting. Inheritance tax is worked out on the whole estate, and where the total is within the available bands, no tax arises on the house. Later selling or letting an inherited property can bring other taxes into play, which differ from inheritance tax.

How much can you inherit tax-free in property?

There is no separate property-only figure. The ordinary nil-rate band is £325,000 per person, and an extra residence nil-rate band of up to £175,000 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.

Do you pay inheritance tax on a jointly owned house?

It depends on how it was owned. A home held as joint tenants passes automatically to the surviving owner by survivorship, and transfers between spouses or civil partners are generally exempt from inheritance tax (gov.uk, as at July 2026, subject to change). A share held as tenants in common forms part of the estate and is assessed in the usual way, so the answer turns on the paperwork.

Can I give my house to my children to avoid inheritance tax?

You can transfer a home, but if you keep living there it is usually a gift with reservation of benefit and stays in your estate for tax (gov.uk, as at July 2026, subject to change). An outright gift may fall outside the estate after seven years. Because capital gains, care and family-law issues also arise, many people discuss this with a qualified professional first.

Is the family home always subject to inheritance tax?

No. A home is only taxed where the whole estate exceeds the available bands, and a home left to a spouse or civil partner is generally exempt on the first death (gov.uk, as at July 2026, subject to change). Many estates fall within the combined nil-rate and residence nil-rate bands and pay nothing, depending on their value and who inherits.

What if the estate is worth more than £2 million?

The ordinary £325,000 band still applies, but the residence nil-rate band reduces by £1 for every £2 of estate value above £2,000,000, so larger estates may lose some or all of that extra allowance (gov.uk, as at July 2026, subject to change). Where a home takes an estate near or over that level, it can be worth taking professional advice.

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.