Risk of taxation on property inheritance in UK

Please note that tax laws can change over time, so it's always a good idea to consult with a professional tax advisor or refer to the latest official government resources for the most up-to-date information.

In the UK, inheritance tax (IHT) is a tax that may be levied on the estate of a deceased person, which includes their property, money, and possessions. The tax is generally paid by the deceased person's estate before it is distributed to the beneficiaries. The rate of inheritance tax can vary depending on various factors, including the total value of the estate and any applicable exemptions or reliefs.

As of September 2021, the standard inheritance tax rate in the UK is 40%. However, there is a tax-free threshold called the "nil-rate band," which is the value of the estate that is not subject to inheritance tax. For the tax year 2021/2022, the nil-rate band is £325,000. This means that if the total value of the estate is below the nil-rate band, there will be no inheritance tax liability.

In addition to the nil-rate band, there are certain exemptions and reliefs that can help reduce the inheritance tax liability on property inheritance. These include:

1. Spouse or Civil Partner Exemption: Transfers of assets between spouses or civil partners are generally exempt from inheritance tax, regardless of the value of the estate.

2. Residence Nil-Rate Band: Since April 2017, an additional nil-rate band known as the "residence nil-rate band" (RNRB) has been introduced for individuals who leave their main residence to direct descendants, such as children or grandchildren. The RNRB was £175,000 for the tax year 2021/2022 and is expected to increase to £175,250 in 2022/2023. This allowance can help reduce the inheritance tax liability specifically related to the family home.

It's worth noting that tax rules can be complex, and there may be other factors and reliefs that could apply in specific cases. To get accurate and up-to-date information on inheritance tax and its implications for property inheritance in the UK, it's advisable to consult a professional tax advisor or refer to the official resources provided by HM Revenue and Customs (HMRC).