What Assets Are Subject to Inheritance Tax?
Essential information about which assets are included in your estate for UK inheritance tax purposes
Key Point
For inheritance tax purposes, your estate includes everything you own at the time of death, minus any debts and liabilities. This includes your share of jointly owned assets and certain gifts made within 7 years of death.
- Use open market value at the date of death.
- Get professional valuations where appropriate (e.g., land and buildings, private company shares, art/collectables).
- Deduct allowable liabilities and funeral expenses before working out the taxable estate.
- Keep records to support each valuation figure reported.
Assets Included in Your Estate
Usually Included
- Your main residence (family home)
- Buy-to-let properties and rental investments
- Holiday homes and second properties
- Commercial property and land
- Overseas property and foreign real estate
Joint ownership & joint bank accounts
For IHT you look at the beneficial entitlement, not just the legal title. With joint bank accounts, HMRC can consider who contributed what when deciding how much belongs in the estate. Do not assume it is automatically 50/50 in all cases.
See IHT404 for jointly owned assets.
Usually Excluded
- Property qualifying for Agricultural Property Relief
- Business premises qualifying for Business Property Relief
Usually Included
- Bank accounts (current, savings, ISAs)
- Stocks, shares, and investment portfolios
- Government and corporate bonds
- Unit trusts and investment funds
- Premium bonds and National Savings
- Foreign bank accounts and investments
- Cryptocurrency and digital assets
- Outstanding loans you've made to others
Usually Excluded
- Qualifying shares eligible for Business Property Relief
- AIM shares held for 2+ years (may qualify for BPR)
Usually Included
- Vehicles (cars, motorcycles, boats, aircraft)
- Jewelry, watches, and precious metals
- Art, antiques, and collectibles
- Furniture and household contents
- Designer clothing and luxury items
- Sports equipment and hobby collections
- Musical instruments and equipment
Household & personal goods (chattels)
Household and personal goods are normally part of the estate and reported on IHT407. There is no general 'under £500' exemption for IHT purposes. (Ordinary reliefs and specific exemptions can still apply.)
Usually Excluded
- Items with purely sentimental value (photos, letters)
Usually Included
- Sole trader business assets
- Partnership shares and interests
- Private company shares
- Business equipment and machinery
- Business property and premises
- Intellectual property and patents
- Business bank accounts and cash
Usually Excluded
- Qualifying business assets with 100% Business Property Relief
- Agricultural businesses with Agricultural Property Relief
Heads-up: Rules for Business Relief (including treatment of some AIM shares) are subject to change in coming years. Always check the current qualifying criteria, holding-period requirements (often 2 years), and any value caps that may apply.
Usually Included
- Life insurance policies written in trust to you
- Endowment policies and investment bonds
- Pension funds (in some circumstances)
- Death in service benefits payable to estate
- Annuity payments continuing after death
Life insurance
- • Included if the payout is payable to the estate.
- • Usually excluded if the policy is written in trust for named beneficiaries (so that the proceeds bypass the estate).
- • Check policy wording and any trust deed before deciding.
Relevant schedules include IHT410 for policies/annuities.
Usually Excluded
- Life insurance written in trust for beneficiaries
- Most pension funds (usually pass outside estate)
- Term life insurance with no cash value
Pensions — rule change from 6 April 2027
Most unused pension funds and certain death benefits will be brought within the estate for IHT from 6 April 2027. Death-in-service benefits are expected to remain outside the estate. If a death occurs on/after that date, review how the pension is treated when completing the return.
Special Considerations
Assets owned with others are included based on your ownership share
- Joint tenants: 50% of value included regardless of contribution
- Tenants in common: Your actual percentage share included
- Joint bank accounts: Usually 50% unless proven otherwise
UK domiciled individuals pay IHT on worldwide assets
- Overseas property and investments fully taxable
- Foreign bank accounts must be declared
- Double taxation relief may apply
Update from 6 April 2025: The UK moved towards a more residence-based test. Long-term UK residents can fall within scope of IHT on worldwide assets even if not UK-domiciled. Always check the current residency conditions when assessing overseas holdings.
Complex rules apply depending on trust type and your involvement
- Assets in discretionary trusts may be included
- Interest in possession trusts usually included
- Bare trusts for minors included in your estate
Bare (absolute) trusts
Assets in a bare trust belong beneficially to the beneficiary. For IHT they are generally considered in the beneficiary's estate (subject to normal gifting rules such as PETs and any reservation-of-benefit issues).
Forms reference
IHT404 (jointly owned assets), IHT407 (household & personal goods), IHT410 (life policies & annuities). Use with the main IHT400 where required.
Assets are valued at their open market value on the date of death - the price they would reasonably fetch if sold on the open market.
Professional Valuations Required:
- • Property and land
- • Business interests
- • Valuable collections or art
- • Unlisted company shares
Market Value Available:
- • Listed shares and securities
- • Bank account balances
- • Government bonds
- • Unit trust holdings