What’s the Inheritance Tax Rate in 2024?

In 2024/25, the rate of UK inheritance tax (IHT) is 40% of the value of the estate – which includes almost all assets you own at the date of your death, with the exception of anything exempt from inheritance tax – above the ‘nil-rate band’.

If you’re under this threshold, which currently stands at £325,000, your estate will be inheritance tax free.

Note that the rate of IHT falls to 36% if you donate at least 10% of your estate to charity.

Calculating Inheritance Tax Liability in 2024/25

To provide an example, a single person with an estate worth £400,000 would have an inheritance tax liability of £30,000.

The calculation is as follows: £400,000 minus a single person’s nil-rate band of £325,000 is £75,000. 40% of £75,000 is £30,000.

Introducing the Main Residence Nil-Rate Band

The new main residence nil-rate band will, by the 2020/21 tax year, increase the value of an estate that can be left tax free to £500,000 for a single individual. This will be made up of the existing £325,000 nil-rate band and a £175,000 main residence nil-rate band.

The main residence nil-rate band was introduced in the 2017/18 tax year, when a single person received an extra £100,000 to use against the value of their main residence when passing the property on to direct descendants (children, grandchildren etc.).

Married couples / civil partners, where the first to pass away leaves their entire estate to the surviving spouse / civil partner, can double their inheritance tax threshold to £650,000.

On top of this, there’s two lots of main residence nil-rate bands worth £175,000 each to use, for a total nil-rate band threshold of £1 million before inheritance tax is payable for couples.

There’s currently nothing on the cards to alter the main rate from its current 40%; however, this could change quickly depending on the government of the day.