Do I have to pay inheritance tax on my main home?

Your home is included in your estate at its full market value, but the residence nil-rate band (up to £175,000 per person, on top of the standard nil-rate band) can shelter much or all of its value if it's left to children, grandchildren or other direct descendants.

What happens if I leave my house to someone other than my children?

The residence nil-rate band only applies when a home is left to direct descendants. Leaving it to a sibling, friend, or anyone else means you lose this allowance, even if everything else about your estate is the same.

Does putting my property in trust avoid inheritance tax?

Not automatically. Trusts can be a useful way to control who benefits from a property and when, but they don't give property the kind of automatic relief that, for example, business or agricultural assets can get. The right structure depends entirely on your goals.

Can I gift my house to my children and still live there?

Not tax-free. If you gift your home but keep living in it without paying full market rent, HMRC treats this as a gift with reservation of benefit, the property stays in your estate for inheritance tax for as long as you keep benefiting from it.

Do second homes and buy-to-let properties get any inheritance tax relief?

Generally, no. They're valued at full market value as part of your estate, and don't qualify for the residence nil-rate band. Depending on how the property is owned and used, other reliefs may occasionally apply, which is worth checking on a case-by-case basis.

Inheritance Tax on Property

For most estates in Scotland, property is the single biggest driver of an inheritance tax bill. Whether it’s the family home, a second property, or a buy-to-let portfolio, how you hold it, and what you do with it during your lifetime, has a direct effect on how much inheritance tax your family pays.

Our Private Client solicitors advise on the full range of property-related inheritance tax planning, from making the most of the residence nil-rate band to structuring property in trust.

We offer a completely free, no-obligation 30-minute consultation – call the number below or leave your details and we’ll call you back within one business day.

Request a Free IHT Consultation

THE CHALLENGE

Why Property Pushes So Many Estates Past the Inheritance Tax Threshold

Rising property prices mean many families across the UK are now unexpectedly caught by inheritance tax, even those who never considered themselves wealthy. Once your total estate (including your home) passes the available threshold, everything above it is taxed at the standard inheritance tax rate of 40%.

There’s a specific allowance for your home: the residence nil-rate band, worth up to £175,000 per person on top of the standard £325,000 nil-rate band, but only if the property is left to children, grandchildren or other direct descendants, and only in full if your estate is worth less than £2 million. Second homes and buy-to-let property don’t qualify for this allowance at all, and are simply valued at full market value as part of your estate.

If you fall into any of these categories, it’s now more important than ever to plan for inheritance tax purposes.

AN EXAMPLE OF THE IMPACT PROPERTY HAS ON YOUR ESTATE

House valued at £1,000,000

A couple leaving a £1 million home to their children can use both nil-rate bands and both residence nil-rate bands to pass the full value tax-free. But the same couple leaving that home to a sibling, or with an estate over £2 million, could lose some or all of that tax-free allowance and face a significant bill without proper planning in place.

OUR SERVICES

How We Can Help You Plan for Inheritance Tax on Pensions

Pension and inheritance tax planning needs to sit alongside the rest of your estate plan, not in isolation. While we advise on all aspects of estate planning, we typically advise on the following aspects related specifically to pensions:

Residence Nil-Rate Band Planning

Making sure your Will is structured so your home actually qualifies for the residence nil-rate band, and claiming the downsizing addition if you’ve sold or moved to a cheaper property.

Leaving Property in Trust

Placing property into trust to control who benefits and when, while managing the inheritance tax rules. Trusts don’t automatically avoid IHT on property, so the structure needs to be right for your goals.

Gifting Property Correctly

If you’re considering gifting a home or second property, you need to understand the gift with reservation of benefit rules so the gift actually removes the value from your estate rather than leaving it exposed.

Second Homes and Buy-to-Lets

We give advice on how additional property is valued and taxed as part of your estate, and where restructuring, gifting, or business ownership models may reduce your exposure.

OUR SIGNATURE SERVICE

Get an Initial Bespoke Inheritance Tax Planning Review for £495 +VAT

An initial fact-finding consultation with our team, covering your home and any other property you own
A comprehensive written report with clear recommendations on how to mitigate your potential inheritance tax liability
A one-hour consultation with a senior consultant to talk you through your options and answer questions

This service gives you a clear, actionable inheritance tax plan built around your individual circumstances, so you know exactly where you stand and what to do next. Not sure it’s right for you yet? Start with our free 30-minute consultation instead.

EXEMPTIONS & OTHER TAX RULES

IHT Exemptions on Property

While property is likely to increase the value of your estate above the tax free threshold in many cases, there are some exemptions to be aware of:

Spouse or Civil Partner Exemption - property left to a spouse or civil partner is completely exempt from inheritance tax, regardless of its value. Whether you're married or in a civil partnership, this transfer doesn't use up your tax free threshold, and any unused allowance can pass to the survivor for later use.
Charitable Gifts - property Property left to a UK-registered charity is also exempt from inheritance tax, and can reduce the rate charged on the rest of your estate if it makes up 10% or more of the net value.

Other Tax Considerations

Who Actually Has to Pay Inheritance Tax - it's the estate that has to pay inheritance tax on a property, not the beneficiary directly, and it's usually settled before the property can be transferred or sold. If there isn't enough cash elsewhere in the estate, executors may need to arrange funds to pay tax on time.
The Tax Year Matters - the tax free threshold available to an estate is fixed for the tax year in which death occurs, so it's worth reviewing your position periodically rather than assuming the figures you last checked still apply.
Capital Gains Tax - gifting a property during your lifetime, rather than leaving it on death, can trigger an immediate Capital Gains Tax charge alongside any inheritance tax planning benefit - the two need to be considered together, not in isolation.

HOW IT WORKS

Our Process

STEP 1

Fact-finding Consultation

We discuss the property you own, your family circumstances and your goals. No obligation, no charge.

STEP 2

Estate and Asset Review

We assess your full inheritance tax exposure, including whether your Will currently makes the most of the residence nil-rate band.

STEP 3

Tailored Strategy

We recommend a bespoke plan, written in plain English, covering your property alongside your other assets.

STEP 4

Implementation

We update your Will and trust arrangements, draft any deeds of gift, and register anything that needs to be registered.

Also Planning Around Gifts, Pensions or a Business?

Property is only one part of your estate. We can review everything together (e.g., lifetime gifts, pensions, business or agricultural assets) so your plan works as a whole.

WHY JONES WHYTE

Dual Qualified, Specialists in IHT Planning

Choosing the right firm is crucial to securing your family’s future and minimising tax liability. Experience with complex estates is crucial for solicitors handling inheritance tax planning. That’s exactly what you get with Jones Whyte.

Experts in tax law - our expert advisers will keep you up to date on available tax reliefs and the most tax efficient strategies to protect your family's financial future.
Our Estate Planning team are dual qualified, meaning they are able to advise clients with assets all over the UK, not just Scotland.
Comprehensive estate planning - we provide the full range of estate planning services meaning you can manage your assets under one roof.
Transparent pricing - no hidden fees & hourly rates.

What Our Clients Say