Inheritance Tax (IHT)
Inheritance Tax (IHT) is a tax on the estate of someone who has died, that is, the total value of their property, money and possessions. It is normally paid out of the estate, not by individual renters or beneficiaries personally.
In the UK, IHT is only charged on the part of the estate above certain thresholds (known as “nil-rate bands”). The standard threshold is currently £325,000, with an additional allowance available when a home is left to direct descendants, which can increase the effective threshold for many estates. Amounts above the available thresholds are usually taxed at 40%, though reliefs and exemptions can reduce the bill.
For renters, Inheritance Tax matters mainly in two situations. First, if you inherit a property you are living in, you may become the owner, but any IHT liability falls on the estate, and normal housing and Renters’ Rights Act protections do not apply once you are the owner-occupier. Second, if your landlord dies, the tenancy usually continues with the personal representatives or new owner. Any IHT on the landlord’s estate is a separate issue and does not, by itself, end your tenancy or remove your statutory rights.
Also read our Making Tax Digital page and see Stamp Duty Land Tax (SDLT) and Capital Gains Tax (CGT)
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