Inheritance Tax is one of the subjects families often have questions about when making a will or dealing with an estate.

Who is responsible for paying it? Does everyone who inherits money receive a tax bill? And what happens if most of the estate's value is tied up in the family home?

Richmond Wills & Probate explains how Inheritance Tax generally works in England and Wales and why it is important to consider the whole estate rather than individual inheritances in isolation.

What is Inheritance Tax?

Inheritance Tax (IHT) may be payable on someone's estate after they die. An estate can include property, savings, investments and other assets, after accounting for relevant liabilities. Not every estate pays IHT.

The standard nil-rate band is currently £325,000. Depending on the circumstances, exemptions, reliefs and an additional residence nil-rate band of up to £175,000 may apply where a qualifying home passes to direct descendants.

The residence allowance is subject to conditions and can be reduced for larger estates.

Who is responsible for paying Inheritance Tax?

In most cases, Inheritance Tax is paid from the estate by the person administering it.

This is usually the executor if there is a will, or an administrator if there is not. Responsibilities can include identifying assets, obtaining valuations, reporting information to HMRC and arranging payment.

Beneficiaries do not normally receive a separate Inheritance Tax bill simply because they inherit.

Exceptions can arise, including in relation to certain lifetime gifts and assets held outside the estate.

Does a surviving spouse pay Inheritance Tax?

Transfers between spouses or civil partners are generally exempt, subject to certain exceptions.

Unused nil-rate bands may also be transferable to the surviving spouse or civil partner's estate where the conditions are met and appropriate claims are made.

What happens when the estate includes a house?

Property is often one of the largest assets in an estate, particularly in Richmond, Teddington and Twickenham.

Where IHT is due but the estate has limited cash, the executor may need to consider funding options, whether instalments are available for qualifying assets, and how payment affects the administration timetable. A sale is not necessarily the only option.

When must Inheritance Tax be paid?

Inheritance Tax is generally due by the end of the sixth month after the month of death.

Interest may arise on late payments, and some tax may need to be paid before probate is granted. Instalment arrangements may be available for qualifying assets, including certain property.

How do pensions affect Inheritance Tax?

Under legislation enacted for deaths on or after 6 April 2027, most unused pension funds and pension death benefits are due to be brought within the scope of Inheritance Tax.

The treatment depends on the pension arrangements and applicable rules.

Families may need to review pensions alongside wider estate planning and seek advice from a suitably qualified financial adviser.

Can making a will help with Inheritance Tax planning?

A will does not automatically reduce an Inheritance Tax bill. It does, however, provide an opportunity to review who should inherit, how assets are owned and whether arrangements reflect your wishes.

Planning may also involve considering lifetime gifts and available exemptions or reliefs, alongside family circumstances and financial security.

What should families do now?

Review whether your will is current, whether your executors are suitable, and whether important financial and property records are organised.

More complicated estates may require specialist legal or tax advice.

Estate planning in Richmond and south west London

Richmond Wills & Probate helps families understand will-writing and estate-administration options. If you are reviewing your will or dealing with an estate, the team can help you identify practical next steps.

Find out more about will writing at https://richmond-wills-probate.com/will-writing/.

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This article provides general information about England and Wales. Tax treatment depends on individual circumstances and legislation may change.