What Is Included in an Estate for Inheritance Tax UK: Everything That Counts (2026)
The IHT estate includes everything you own at open market value at death — property, savings, ISAs, investments, personal possessions, and your share of jointly owned assets. It also includes gifts where you've retained a benefit. Pensions are currently outside (until April 2027). Life insurance in trust is outside. Here is the complete picture.
| Asset | In IHT Estate? | Notes |
|---|---|---|
| Main home | Yes (net of mortgage) | RNRB (up to £175k) reduces taxable value if home passes to direct descendants |
| Buy-to-let / investment property | Yes (full market value) | No RNRB; instalment option (s227) for IHT payment available |
| Bank accounts / savings | Yes (full balance) | Including accrued interest to date of death |
| Cash ISA | Yes (full balance) | ISA wrapper has no IHT benefit |
| Stocks & Shares ISA (non-AIM) | Yes (market value) | Standard funds/ETFs/shares — no IHT relief |
| AIM ISA (BPR-qualifying shares, 2yr+) | In estate — but 100% BPR | BPR reduces taxable value to £0 (up to £1m cap from April 2026) |
| SIPP / Personal pension (until April 2027) | NO — outside estate | From April 2027: enters estate under Budget 2024 reform |
| Life insurance in trust | NO — outside estate | Payout goes to trust beneficiaries direct; not in estate |
| Life insurance NOT in trust | Yes (sum assured) | Policy in own name is an estate asset at sum assured |
| Jointly owned (joint tenants) — first death | NO — survivorship | Passes to surviving joint owner automatically; not in estate |
| Jointly owned (tenants in common) | Yes — deceased's share only | The specific share passes under will/intestacy |
| Gifts with reservation (s102 FA1986) | Yes — full asset value | Given away but still benefiting from it; treated as still owned |
| Gifts 7yr+ before death (no GWR) | NO — exempt PET | Fully outside the estate if no gift with reservation |
| Assets to spouse (spousal exemption, s18) | Not taxable on first death | Deferred to second death; NRB/RNRB transferred to survivor |
| Charitable legacies (s23 IHTA) | Not taxable | Exempt; 10%+ triggers 36% reduced rate on remainder |
2026–27 position. From April 2027: pension funds enter the IHT estate (Budget 2024). BPR/APR cap £1m at 100% from April 2026.
What's in the IHT Estate: Detailed Guide
Property: main home, buy-to-let, and land
All property owned at death is in the IHT estate at its open market value — the price a willing buyer would pay to a willing seller in the open market at the date of death: (1) Main home: the full market value, less any mortgage outstanding (the mortgage is a deductible liability). If the RNRB (up to £175,000) is available, it reduces the taxable value of the home; (2) Buy-to-let and investment property: in the estate at full market value; no RNRB (RNRB applies only to the main home passing to direct descendants); (3) Land and development land: at open market value; agricultural land may qualify for APR (reducing the IHT value); (4) Overseas property: owned by a UK domiciled person is in the IHT estate regardless of location (ss6-8 IHTA 1984); a non-UK domiciled person is only taxed on UK-situated assets. Joint property: if owned as joint tenants, the whole property passes automatically to the surviving owner (outside the will and outside the estate for IHT on the first death). If owned as tenants in common, only the deceased's share is in the estate (passes under the will or intestacy).
Bank accounts, savings, and cash ISAs
All cash holdings are in the IHT estate at face value: (1) Current and savings accounts: the balance at date of death — including accrued interest; (2) Fixed-rate bonds and fixed-term deposits: the current redemption value; (3) Cash ISAs: the balance — despite the income tax-free status during life, the ISA has no IHT exemption. The ISA is in the estate at full face value; (4) NS&I products: Premium Bonds, income bonds, and index-linked certificates are all in the estate at face value (the deceased's winning chances on Premium Bonds end on death, but the bonds themselves are redeemed by NS&I and the value passes to the estate); (5) Premium Bond winnings: any winnings paid after death (within a limited period) are added to the estate. Note: the 'death account' — some banks allow a 'death in service' account for final salary. Cash in employer accounts that passes directly to a beneficiary may not be in the estate (depends on the rules of the scheme). For most standard bank accounts, the balance at death date is the IHT value.
Investments, stocks and shares ISAs, and pensions
Investments are in the IHT estate at the 'loss on sale' or open market value rules: (1) Listed shares and funds: valued at the lower of (a) 'quarter-up' price (midpoint between open and close + 25% of the difference) or (b) average of the highest and lowest marked bargains on the date of death — both options exist under IHTA 1984; (2) Stocks and Shares ISAs: in the estate at market value. The ISA tax wrapper has no IHT benefit (except for AIM BPR-qualifying shares within the ISA, which may be 100% IHT-exempt after 2 years); (3) SIPP and personal pensions: currently (until 5 April 2027) OUTSIDE the estate — pension funds pass to nominated beneficiaries outside the estate and are not IHT-taxable. From 6 April 2027 (Budget 2024), pension funds enter the estate; (4) Defined benefit (final salary) pensions: the pension income ceases on death (survivors' benefits may pass to spouses/dependants separately — outside the estate); the capital value of the pension pot is not included in the IHT estate; (5) Life insurance NOT in trust: in the estate at the sum assured; (6) Life insurance IN a valid trust: outside the estate — the payout goes to the trust beneficiaries.
Personal possessions, vehicles, and valuables
All personal possessions are in the estate at open market value: (1) Jewellery, watches, and collectibles: valued at the price they would achieve in an open market sale (auction value, not insured replacement value). Items of jewellery valued over £1,500 and any single item over £500 should be specifically identified in the IHT return; (2) Artwork and antiques: at auction/market value (professional valuation required for significant items); (3) Vehicles: at market value (Parkers/AutoTrader guide prices are acceptable); (4) Household contents and furniture: at a realistic open market value (typically much lower than original purchase price or insurance value); (5) Computers, electronic equipment, clothing: at market value (generally low); (6) Items with outstanding finance: the finance liability is deducted (the net value — market value minus outstanding finance — is in the estate). Heritage property: assets designated as heritage property (national importance — works of art, historic buildings, scientific collections) may qualify for conditional exemption from IHT under s30 IHTA 1984 — the exemption applies while the property remains accessible to the public and is maintained.
Gifts with reservation: assets you've given away but still benefit from
A gift with reservation (GWR — s102 Finance Act 1986) is a gift where the donor has not fully given up the benefit. The GWR rules mean that the gifted asset is treated as remaining in the estate at death, as if the gift was never made. Common GWR situations: (1) Gifting a house to children but continuing to live in it rent-free. The house is a GWR — it remains in the estate at full market value; (2) Giving an asset away and continuing to receive income or benefits from it; (3) Giving a bank account away but continuing to draw on it. How to avoid GWR: (a) Pay a full market rent if you continue to live in the gifted property — rent is taxable income for the recipient, but it removes the GWR stigma; (b) Actually vacate and give up all use of the gifted asset; (c) Use a Discounted Gift Trust (a structured arrangement where the gift is into a trust but the donor retains a fixed income stream — HMRC accepts this does not create a GWR if structured correctly). The 7-year clock does NOT run for GWR assets — the clock only starts when the GWR ceases (donor stops benefiting).
What is NOT in the IHT estate
The following are EXCLUDED from the IHT estate: (1) Life insurance in a valid trust: the policy is owned by the trust, not the deceased — the payout goes directly to trust beneficiaries outside the estate (MWP Act 1882 s11 trust for spouse; discretionary trust for others); (2) Pension funds (until April 2027): SIPP and personal pension funds are outside the estate — from April 2027 this changes; (3) Assets subject to 100% BPR: qualifying AIM shares and unquoted business interests after 2 years' ownership are in the estate but reduce the taxable value to £0 (up to the £1m combined cap from April 2026); (4) Assets subject to 100% APR: qualifying agricultural property (owner-occupied) is in the estate at agricultural value, with 100% APR reducing the IHT value to £0; (5) Assets passing to a spouse or civil partner: the spousal exemption (s18 IHTA 1984) means assets passing to a surviving spouse are not taxable on the first death; (6) Charitable legacies: assets passing to qualifying UK charities are exempt from IHT under s23 IHTA 1984; (7) Lifetime gifts more than 7 years before death: these have already left the estate and are not included (assuming no GWR); (8) Jointly tenanted property on the first death: the surviving joint tenant inherits by right of survivorship, not through the estate.
Frequently Asked Questions
What is included in an estate for inheritance tax?
Everything you own at death at open market value: property (home, buy-to-let, land), bank accounts, savings, cash ISAs, investments, stocks and shares ISAs, business interests (before BPR), farm assets (before APR), personal possessions, vehicles, jewellery, and your share of jointly owned assets. Also included: gifts with reservation (s102 FA1986 — assets you gave away but still benefit from). Deductions: mortgages, debts, and funeral costs (s172 IHTA). Not in the estate: life insurance in trust, pension funds (until April 2027), charitable legacies, and spousal transfers.
Is my pension included in my estate for inheritance tax?
Currently (until 5 April 2027): no — SIPP and personal pension funds are outside the IHT estate. They pass to nominated beneficiaries without IHT (though income tax applies on drawdown after age 75). From 6 April 2027 (Budget 2024 reform): pension funds will enter the IHT estate and count as part of the taxable estate. Maximise pension contributions and review nominations before April 2027.
Is a cash ISA included in my estate for inheritance tax?
Yes — a cash ISA is in the IHT estate at full face value. Despite being tax-free for income tax purposes during life, the ISA has no IHT exemption. Exception: a Stocks and Shares ISA holding AIM BPR-qualifying shares (trading companies, 2+ years) may qualify for 100% IHT exemption on those shares after 2 years, even inside the ISA wrapper.
What is a gift with reservation and how does it affect IHT?
A gift with reservation (GWR — s102 Finance Act 1986) is a gift where the donor continues to benefit from the asset. The GWR rules treat the asset as remaining in the estate at death — the gift is ignored for IHT. Common example: gifting a house to children but continuing to live in it rent-free. The house stays in the estate. To avoid GWR: pay a full market rent; actually move out; or use a properly structured Discounted Gift Trust.
Is jointly owned property included in the estate?
Depends on the ownership type: (1) Joint tenants: on the first death, the whole property passes automatically to the surviving owner by right of survivorship — outside the will and outside the estate for IHT on the first death; (2) Tenants in common: the deceased's specific share is in the estate — it passes under the will (or intestacy) and is valued at the market value of the share.
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