For many UK homeowners, property is the most valuable part of their estate. But when it comes to inheritance tax (IHT), it can also be the most complex. Understanding how property is treated under IHT — and what you can do to reduce your liability — is essential for protecting your legacy.
How Property Is Treated Under Inheritance Tax
Inheritance tax is charged at 40% on the value of an estate above the nil-rate band. Property — whether your main residence or additional homes — is included in the total value of your estate. This means your home could push your estate above the threshold, triggering a significant tax bill for your heirs.
Thresholds and Exemptions
As of 2025, the standard nil-rate band is £325,000 per person. In addition, the residence nil-rate band (RNRB) allows an extra £175,000 if you leave your main home to direct descendants. This means a married couple could potentially pass on up to £1 million tax-free — but only if the conditions are met.
Strategies to Reduce IHT on Property
Here are some effective ways to reduce inheritance tax liability on property:
- Gifting Property : You can gift property during your lifetime. If you survive for 7 years after the gift, it may fall outside your estate for IHT purposes.
- Residence Nil-Rate Band : Ensure your will passes your main residence to children or grandchildren to qualify for the RNRB.
- Using Trusts : Placing property into a trust can help control how it’s passed on and potentially reduce IHT, though this requires careful planning.
- Downsizing : Selling a large property and gifting the proceeds can be a strategic way to reduce your estate’s value.
Common Pitfalls
How Rite Wealth Can Help
At Rite Wealth, we specialise in estate planning strategies that help homeowners protect their property and reduce inheritance tax. From reviewing your will to setting up trusts and gifting plans, we provide tailored advice to secure your legacy.
Ready to Plan Ahead?
If you’re a homeowner concerned about inheritance tax, now is the time to act. Contact Rite Wealth for a personalised estate planning consultation and take control of your financial future.
This article is for information only. It is not financial advice or a personal recommendation, and it does not take account of your circumstances. Any recommendation would follow a full assessment.
Tax treatment depends on individual circumstances and may change in future. The Financial Conduct Authority does not regulate will writing or some forms of estate planning and tax advice.