Understanding Inheritance Tax thresholds

As the executor of an estate, managing the Inheritance Tax is one of the most important parts of your responsibilities. The good news is that for the 2025/26 tax year, there should be very little changes to residential Inheritance Tax thresholds.

In this guide, we hope to provide you with a clear overview of the Inheritance Tax thresholds, and links to resources to help you further understand the process. At The Property Buying Company, we live and breathe property transactions, if you want to talk, or want some guidance, then please feel free to contact us.

What are the current Inheritance Tax thresholds?

Something to note: With the Inheritance Tax thresholds remaining fixed until 2028, HMRC predicts that more estates will need to pay Inheritance Tax. By 2028/29 and 2029/30, the amount of estates needing to pay Inheritance Tax will have risen by 1,400 and 2,900 respectively.

When is Inheritance Tax due?

Inheritance Tax is paid by the executor, and must be paid by the end of the sixth month after someone has died. For example, if someone passed away in January, Inheritance Tax would be due by the end of July. 

Depending on the amount of cash flow within the estate, you may be able to pay Inheritance Tax in instalments –  which can be particularly beneficial if the main asset, like a house, would take a while to sell. 

Before you can make any Inheritance Tax payments, you will need to request an Inheritance reference number from HM Revenue and Customs, at least three weeks in advance.

Avoiding Inheritance Tax (legally)

Unfortunately, there aren’t any ways for executors to avoid paying Inheritance Tax on an estate that is liable. You will be able to ask to pay in instalments, but nothing that will stop you from having to pay it altogether.

However, if you are looking for a way for your family to avoid paying Inheritance Tax on your own estate (before you die), then we have a few ways below:

Why have Inheritance Tax thresholds been in the news?

This section is less for residential estate executors, but more for agricultural and business executors. In the 2024 Autumn Budget, the new Labour government announced new limitations on Inheritance Tax relief on agriculture and businesses – which means more family businesses, and more family farms will be liable to Inheritance Tax.

From 6th April 2026, the full 100% Inheritance Tax relief on agricultural and business property will be capped at the first £1 million of combined agricultural and business assets. For anything above this threshold, Inheritance Tax will be due at 20%. 

But, the tax can be paid at interest free instalments over 10 years, allowing landowners time to pay without needing immediate liquidation of assets. This paired with the already existing spouse exemptions and nil-rate bands, means couples with qualifying farmland, can inherit up to £3 million Inheritance Tax free.

However, as the protests across the UK have shown, farmers are not happy. This is mainly because they are worried they will be forced to sell all or a portion of their farms in order to pay the Inheritance Tax. 

The Times reported that a typical 200 acre farm with an annual profit of £27,300 would face an Inheritance Tax liability of £435,000, the equivalent of 159% of its yearly profit, making it unsustainable for many family run farms.

What other taxes do you pay on inherited properties?

In most cases, beneficiaries do not need to pay any taxes on the act of inheriting a property. By the time the property has been released to you, Inheritance Tax should have already been paid by the executor. 

Let’s have a look at some of the other taxes usually paid on property transactions:

Stamp Duty on inherited property

Neither the executor or beneficiary needs to pay Stamp Duty on inherited property on the transfer of ownership. 

However, if the beneficiary decides to take on any outstanding mortgage, then they will need to pay Stamp Duty on the mortgage exceeding £250,000. Similarly, if they decide to buy out any other beneficiaries (like siblings), then they will also need to pay Stamp Duty based on the value of the share being bought.

Capital Gains Tax on inherited property

As the executor, if you decide to sell the property during the probate process, then you may need to pay Capital Gains Tax on any increase in value from the date of death to the sale date. However, you will also be liable to your ‘Executor’s Capital Gains Tax exemption’, which allows you £3,000.

But, if the beneficiary inherits the property, and they now own two properties, then they must inform HMRC which is their main residence within two years. If they fail to report it, HMRC will determine it for them if they decide to sell it – which will most likely mean they pay more Capital Gains Tax on the higher valued property.

Dealing with property in the estate

If there is any property within an estate, this will most likely be the most expensive asset. As an executor, it is your responsibility to look after the property through the probate process and make judgements on the behalf of any beneficiaries.

One of the first things you will need to do is get a probate valuation, as this will let you know how much Inheritance Tax is due on the property & what the best course of action is – to sell or not to sell, that is the question.

Our role

If the property needs to be sold to pay off the existing mortgage, Inheritance Tax, or distribute the estate, then The Property Buying Company is more than happy to help. 

We buy hundreds of inherited and probate properties every year, and have built a process which is tailored to provide you with a fast house sale – with our average sale lasting just 91 days. 

We will cover all the selling and legal fees, while working with you to ensure the house sale is completed on time. We can even get all the paperwork out of the way, and line up the sale for once probate has been granted - releasing the funds within 48 hours of completion.

If you would like to know more about how much we will offer, please fill out our form below and we will get back to you with a no-obligation cash offer.