Do I pay inheritance tax on my parents' house?
You don't pay it personally — inheritance tax is paid by the estate before you inherit. Whether any is due depends on the whole estate's value against the allowances. A home passing to children can use the £325,000 nil-rate band plus £175,000 residence nil-rate band — up to £500,000 per parent, or £1m for a couple — so many family homes pass with no inheritance tax.
Detailed explanation
The worry about “losing the house to tax” is usually overstated, thanks to the residence allowance.
- The estate (executors) pays any inheritance tax, not the beneficiary.
- A home to direct descendants unlocks the residence nil-rate band.
- A couple can combine allowances to pass on up to £1m tax-free.
- Tax is only due on value above the available bands, at 40%.
A widowed parent leaves a £450,000 home and £50,000 savings to two children. Combined allowances (their own plus their late spouse's transferred bands) far exceed £500,000, so the children inherit with no inheritance tax to pay.
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Sources
- GOV.UK — How Inheritance Tax works: thresholds, rules and allowances
- GOV.UK — Inheritance Tax: residence nil rate band
- HMRC — Inheritance Tax statistics 2024/25
- Reviewed by
- ClearLegacy editorial team
- Last reviewed
- June 2026
- Next review
- December 2026
- Jurisdiction
- England & Wales
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