Probate and inheritance tax: what you need to know
Probate and inheritance tax (IHT) cover a wide range of rules, allowances and reliefs. Understanding how the two interact matters for anyone dealing with an estate in the UK. This guide explains how IHT is calculated, what the current allowances are, who pays, and why professional advice so often makes a practical difference.
This guide covers:
- IHT calculations, allowances and our quick inheritance tax calculator
- A brief overview of inheritance tax exemptions and reliefs
- Inheritance tax and probate forms
- The availability of inheritance tax loans
What is inheritance tax?
Inheritance tax is a tax charged on the estate of someone who has died. The estate includes property, money and possessions. The amount of tax due depends on the total value of those assets.
What is probate?
Probate is the legal process for administering a deceased person’s estate and distributing it to their beneficiaries.
Grant of probate and letters of administration
A grant of probate and letters of administration are legal documents that give executors or administrators the authority to deal with an estate. The people who receive these documents are called personal representatives.
Who applies for probate?
If you are a named executor in the deceased’s will, you apply for a grant of probate. If there is no will, the closest living relative applies for letters of administration to become the administrator. Priority runs from spouse or civil partner, to children, then parents, then brothers and sisters, then more distant relatives.
Two things are worth knowing about that order. Grandchildren do not sit in a queue behind all children. They step into the place of a parent who died before the deceased did. And while it is nearly always a relative who applies, that is not an absolute rule. Where nobody qualifies, a creditor of the estate or ultimately the Crown can apply instead.
The probate process
The first step is to establish whether probate is required. If it is, you must value the estate before making your application, either online or by post. That value appears in the probate forms so that HMRC can confirm whether IHT is due.
For most estates this is simpler than it sounds. Since January 2022 the majority count as ‘excepted’, which means no tax is due and you give the figures on the probate application itself. There is no separate account to send HMRC. Only larger or more complex estates need a full account on form IHT400.
It is not always needed. Where everything was held jointly and passes to the surviving owner, or where the only assets are modest bank balances, a grant may not be required at all. Each bank sets its own limit for releasing funds without one, and most sit somewhere between £5,000 and £50,000. It is worth asking before you assume.
Any IHT owed must be paid, or payment formally arranged, before the grant of probate or letters of administration are issued. You will usually get probate within 12 weeks of submitting a complete application. It can take longer if HMCTS asks for more information, and paper applications usually take longer than online applications. Once you have the grant, you can legally administer the estate.
Who pays inheritance tax?
Where the deceased left a will, the executor is responsible for paying the IHT. Where there is no will, that responsibility falls to the administrator.
Because IHT must be paid before probate is granted, many personal representatives need to arrange funds before they can access the estate. HMRC will sometimes agree deferred or instalment payments. A probate loan or inheritance tax loan can also bridge the gap.
Recipients of gifts made by the deceased within the seven years before death may also be personally liable for any IHT due on those gifts.
Tax can be paid from estate funds or from the proceeds of selling assets. The deadline is the end of the sixth calendar month after the month of death. For example, if someone dies in January, the deadline is 31 July. There are provisions for paying by instalment where probate property sales are involved.
How inheritance tax is calculated
The estate’s total value includes everything the deceased owned: property and land, cash, shares and investments, and valuables such as jewellery, cars and artwork, minus any outstanding debts.
The nil-rate band and the current threshold
The amount up to the nil-rate band passes free of IHT. The nil-rate band is currently £325,000 per person, frozen at that level until April 2031. The part of the estate above the available thresholds is normally taxed at 40%, after any exemptions and reliefs.
An additional allowance, the residence nil-rate band (RNRB), applies when someone leaves their main home to direct descendants such as children or grandchildren. The RNRB is currently £175,000 per person, also frozen until April 2031. A surviving spouse or civil partner can inherit their late partner’s unused allowances, meaning a couple can potentially pass on up to £1 million free of IHT.
Pensions and inheritance tax from April 2027
Currently, unused defined-contribution pension funds sit outside the estate for IHT purposes. However, the Finance Act 2026 received Royal Assent on 18 March 2026. As a result, from 6 April 2027, most unused pension funds and lump sum death benefits will be brought into the estate for IHT purposes. The change applies to deaths on or after that date. Key exceptions include death-in-service lump sum benefits and pension benefits passing to a surviving spouse or civil partner, which remain exempt.
If pension wealth is likely to affect the estate you are administering, speak to a probate solicitor or financial adviser. See our guide to inheritance tax on pensions for more detail.
Gifts, exemptions and reliefs
Gifts made in the seven years before death may be liable for IHT. However, several exemptions reduce or eliminate that liability. Gifts to charity are fully exempt. Each person can give away up to £3,000 per year free of IHT. Regular gifts from surplus income may also qualify for exemption.
There are numerous other inheritance tax exemptions and reliefs. Business property relief (BPR) and agricultural property relief (APR) both apply, though the rules changed on 6 April 2026. From that date, 100% relief is capped at the first £2.5 million of combined qualifying agricultural and business property per person. Any value above that cap attracts 50% relief, giving an effective IHT rate of 20% on the excess. Spouses and civil partners can transfer any unused allowance between them, potentially protecting up to £5 million of qualifying assets. Missing or misapplying these exemptions is a costly mistake, which is why specialist advice matters.
The inheritance tax loan
One of the most common practical problems in estate administration is cash flow. IHT must be paid before the grant of probate is issued, but executors often cannot access estate funds until after the grant is in place.
One solution is a probate loan. A probate or inheritance tax loan is specifically designed to solve this problem. The loan is normally secured against the estate rather than against you personally. Because of that, the decision usually turns on the estate rather than on your income or credit history, and there are typically no monthly repayments. The loan and the interest are repaid from the estate once probate is complete, before the estate is distributed.
Two questions are worth putting to any provider in writing. Am I personally liable for this debt, or is the estate? And what is the total amount repayable if administration takes longer than expected? Because interest rolls up rather than being paid monthly, time drives the final cost. Check the free routes first too, including the HMRC Direct Payment Scheme and the instalment option, both of which are covered in the FAQs below.
For many personal representatives, this arrangement allows the estate to move forward without unnecessary delay.
Why professional advice helps with probate and inheritance tax
Accuracy and HMRC compliance
Specialist probate solicitors can handle every aspect of the IHT calculation and payment to HMRC. This reduces the risk of errors, ensures the right amount is paid on time, and gives you a clear record of compliance throughout the process.
Reducing the risk of personal liability
As executor or administrator, you may be personally liable for losses caused by mistakes made during estate administration. A solicitor takes on the work, including identifying beneficiaries, handling third-party claims and managing any disputes. Solicitors also carry professional indemnity insurance.
Be clear about what that does and does not do. Instructing a solicitor does not transfer your legal responsibility as personal representative. You remain the one answerable to the beneficiaries and to HMRC. What changes is that the work is done by someone who does it every day, and that if their advice turns out to be negligent, there is insurance behind it. In practice that is a substantial reduction in risk. It is not the same as having no risk.
Claiming the right exemptions and reliefs
A specialist will review the estate for every available relief: taper relief, agricultural property relief, business property relief and others. They can also seek a tax refund if assets are later sold for less than the probate value. Those claims have time limits. For land and property the sale must happen within four years of the death. For quoted shares the window is only twelve months. Distributing the estate too early, or missing an eligible claim, can have serious financial consequences. The risks of acting as a personal representative increase significantly with the complexity and value of the estate.
Managing the process from start to finish
Probate involves a significant amount of paperwork. There are forms to complete, deadlines to meet and third parties to deal with. A solicitor guides you through each stage, including mediating between family members if disputes arise, and handling any contentious probate claims that occur.
How The Probate Network can help
Our network of probate and inheritance tax solicitors and practitioners can support you with every aspect of estate administration. Learn more about probate legal options.
Frequently asked questions
What is the inheritance tax threshold in 2026?
The standard nil-rate band is £325,000 per person, frozen at that level until April 2031. An additional residence nil-rate band of £175,000 applies when you leave your main home to direct descendants. Married couples and civil partners can combine unused allowances, potentially passing on up to £1 million free of IHT. The part of the estate above the available allowances is normally taxed at 40%, after any exemptions and reliefs.
Do married couples and civil partners pay inheritance tax on each other’s estates?
Transfers between spouses and civil partners are normally fully exempt from IHT. The old test asked whether the recipient was domiciled in the UK. Since 6 April 2025 it asks whether they are a long-term UK resident, broadly meaning UK resident for at least 10 of the previous 20 tax years. Where the donor is a long-term UK resident but their spouse or civil partner is not, the exemption is limited to £325,000 in total, less any earlier transfers that used the limit, unless the recipient elects otherwise. In addition, any unused nil-rate band and residence nil-rate band from the first death can transfer to the surviving partner. This means the survivor can potentially use a combined standard allowance of up to £650,000, or up to £1 million where the residence nil-rate band also applies.
Will my pension be subject to inheritance tax?
Until 5 April 2027, unused defined-contribution pension funds generally sit outside the estate for IHT purposes. From 6 April 2027, the Finance Act 2026 brings most unused pension funds and lump sum death benefits into the estate. The change applies to deaths on or after that date. Benefits passing to a surviving spouse or civil partner remain exempt, as do death-in-service lump sums. If pension wealth is relevant to your planning, speak to a qualified adviser.
What happens if inheritance tax is not paid on time?
IHT is due by the end of the sixth month after the month of death. Miss that deadline and HMRC charges interest on the unpaid balance. The current late payment interest rate is 7.75% per year (set at the Bank of England base rate plus 4%), calculated daily. Because this rate tracks the base rate, check GOV.UK for the latest figure. Probate cannot be granted until the tax is paid or formally arranged, so late payment also delays estate administration. If you cannot access estate funds in time, options include the HMRC Direct Payment Scheme, instalment arrangements for qualifying assets such as property, or an inheritance tax loan secured against the estate.
This article is for general guidance only and does not constitute legal, tax or financial advice. Rules and thresholds can change and every estate is different. For advice on your own circumstances, speak to a qualified professional. You can book a free legal consultation through The Probate Network.
