The Inheritance Tax Act 1984 is the main piece of UK law that governs inheritance tax (IHT). It sets out when a charge arises, how an estate is valued, which transfers are exempt, and how the reliefs work. It applies across the UK, including England and Wales, and remains in force today, amended many times by later Finance Acts.
Most guides blur the Act with the tax rules people pay under it now. They are not the same: the Act built the machinery, while the numbers you pay, the £325,000 threshold and the 40% rate, come from later Finance Acts.
What is the Inheritance Tax Act 1984?
The Inheritance Tax Act 1984, often shortened to IHTA 1984, is the consolidating statute that brings the rules on inheritance tax into one place. It was first passed as the Capital Transfer Tax Act 1984, then renamed by section 100(1) of the Finance Act 1986 when the tax itself was renamed from capital transfer tax to inheritance tax.
The Act pulled together earlier law, principally Part III of the Finance Act 1975, into a single reference point (legislation.gov.uk, as at August 2026). A consolidating Act does not usually invent new rules; it tidies existing ones into a clearer structure, which is why it remains the backbone of any estate plan.
Is the Inheritance Tax Act 1984 still in force?
Yes. The Inheritance Tax Act 1984 is still the governing statute for inheritance tax across the UK. It has been amended many times, mostly by annual Finance Acts, but never repealed and replaced. When HMRC assesses inheritance tax today, it works from the framework this Act set out.
Because the Act is updated rather than rewritten, the version that matters is the current one. The most recent changes came at Budget 2025 (26 November 2025), including a freeze on the main thresholds and reforms to business and agricultural reliefs (gov.uk, as at August 2026, subject to change).
What did the 1984 Act actually set up?
The Act set up the durable framework of inheritance tax: a charge on death, rules for lifetime gifts and the seven-year rule, the taxation of trusts, and the main reliefs and exemptions. These parts stay broadly constant while rates and thresholds change each Budget.
That split is the most useful thing to hold in mind: the 1984 Act is the rulebook, and Budgets set the current rates and thresholds. The Act also decides who reports and pays, chiefly the personal representatives who handle probate.
Which sections of the Inheritance Tax Act 1984 matter most?
A handful of sections carry most of the weight in everyday estate administration. Section 4 charges tax on death, section 7 sets the rates, section 18 gives the spouse exemption, section 160 fixes how assets are valued, and section 216 requires personal representatives to deliver an account to HMRC. In plain English:
| Section | What it does, in plain English |
|---|---|
| Sections 1 to 4 | Establish the charge to inheritance tax, including the charge on the value of the estate immediately before death. |
| Section 7 | Sets the rates of tax, applied against the tax-free thresholds set by Finance Acts. |
| Section 18 | Exempts most transfers between spouses and civil partners, so assets can usually pass to a surviving partner tax free. |
| Sections 103 to 114 | Business property relief, which can reduce the taxable value of qualifying business assets. |
| Sections 115 to 124 | Agricultural property relief, which can reduce the taxable value of qualifying farmland and farm property. |
| Section 160 | Defines value as the price the property might reasonably fetch on the open market at the relevant time. |
| Section 216 | Requires personal representatives to deliver an account of the estate to HMRC. |
Source: Inheritance Tax Act 1984 on legislation.gov.uk, as at August 2026, subject to change.
What are the current inheritance tax figures under the Act?
The 1984 Act provides the structure, but the current figures come from later Finance Acts. As at August 2026 the nil-rate band is £325,000, the residence nil-rate band up to £175,000, and tax is charged at 40% above the thresholds, or 36% where at least 10% of the net estate passes to charity.
| Allowance or rate | Level (August 2026) |
|---|---|
| Nil-rate band | £325,000 |
| Residence nil-rate band | Up to £175,000 |
| Combined for a couple, home to descendants | Up to £1,000,000 |
| Standard rate | 40% |
| Reduced rate (10%+ of net estate to charity) | 36% |
| Residence band taper | Withdrawn £1 for every £2 of estate over £2,000,000 |
Source: gov.uk/inheritance-tax, as at August 2026, subject to change.
Three current points sit on top of the Act and are easy to get wrong.
- Frozen thresholds. The nil-rate band, residence nil-rate band and £2,000,000 taper threshold are frozen until 5 April 2031, extended at Budget 2025 (26 November 2025).
- Relief reform. From 6 April 2026, 100% business and agricultural property relief applies to the first £2,500,000 combined per person, with 50% above, and the allowance is transferable up to £5,000,000 for a couple (announced 23 December 2025).
- Pensions. From 6 April 2027, most unused pension funds are expected to fall within the estate for inheritance tax.
How does the Act charge tax on an estate?
Under the Act, tax on death is worked out in a set order: value the estate, take off exemptions and reliefs, apply the tax-free thresholds, then charge the rate on what remains. Personal representatives report the estate to HMRC and pay the tax due.
- Value the estate. Add up assets at open market value under section 160, then deduct debts.
- Apply exemptions. Remove exempt transfers, such as anything passing to a spouse or civil partner under section 18, and gifts to charity.
- Apply reliefs. Reduce the value of qualifying business or agricultural property, within the current limits.
- Set against the thresholds. Apply the nil-rate band, and the residence nil-rate band where a home passes to direct descendants.
- Charge the rate. Apply 40%, or 36% where at least 10% of the net estate passes to charity, to the value above the thresholds.
- Report and pay. Personal representatives deliver an account to HMRC under section 216 and pay the tax, usually before probate is granted.
Valuations, exemptions and reliefs are where estates get complicated, and where planning during a person's lifetime can help. Our fixed-fee planning sets out the position before figures reach HMRC.
Frequently asked questions
Is the Inheritance Tax Act 1984 still law?
Yes. The Act remains in force across the UK and is still the governing statute for inheritance tax. It has been amended many times, mainly by annual Finance Acts, but never repealed and replaced. HMRC assesses inheritance tax today using the framework it set out.
What was the Inheritance Tax Act 1984 originally called?
It was originally the Capital Transfer Tax Act 1984. Section 100(1) of the Finance Act 1986 renamed the tax from capital transfer tax to inheritance tax, and the Act was renamed to match. The section numbering carried over, so practitioners still cite the 1984 sections today.
What is Section 18 of the Inheritance Tax Act 1984?
Section 18 provides the spouse and civil partner exemption. In most cases, assets passing on death to a surviving spouse or civil partner are exempt from inheritance tax, which is why the tax often falls on the second death rather than the first. Conditions apply, and the position can differ where a partner is not UK domiciled.
What is Section 160 of the Inheritance Tax Act 1984?
Section 160 defines how assets are valued for inheritance tax. In general, value means the price the property might reasonably be expected to fetch if sold on the open market at the relevant time. This open market value is the starting point for working out how much of an estate may be taxable.
Does the Inheritance Tax Act 1984 apply in Scotland and Northern Ireland?
Yes. Inheritance tax is a UK-wide tax, so the Act applies in England, Wales, Scotland and Northern Ireland. Succession and probate procedures differ between the nations, for example Scotland uses confirmation rather than a grant of probate, but the inheritance tax rules under the Act are the same across the UK.