Inheritance Tax in Portadown: Thresholds, Reliefs and Payment

Inheritance tax in Portadown follows the same UK-wide rules that apply across Northern Ireland: each person has a tax-free threshold of £325,000, and anything above it is taxed at 40%. An extra £175,000 residence allowance can apply when the family home passes to children or grandchildren, and married couples and civil partners can combine allowances to reach up to £1 million tax-free. The executor, or a court-appointed administrator if there is no will, values the estate, reports to HMRC, and pays any tax before beneficiaries receive their share.¹

The Tax-Free Thresholds

Every estate has a nil-rate band of £325,000. Nothing is owed on value falling within it. The threshold has been frozen since 2009 and stays frozen until at least April 2030.²

A separate residence nil-rate band of £175,000 is available when the deceased’s home passes to direct descendants such as children or grandchildren. Stacked with the standard band, that gives one person a potential tax-free allowance of £500,000. The residence band is also frozen until April 2030.³

Larger estates lose the residence allowance. Above £2 million, it tapers away by £1 for every £2 over the threshold, so an estate worth £2.35 million or more keeps only the £325,000 standard band.³

Transferring Allowances Between Spouses

When the first spouse or civil partner dies without using the full nil-rate band, the unused share transfers to the survivor. In practice, a surviving spouse’s estate can have a combined nil-rate band of up to £650,000 and a combined residence band of up to £350,000, reaching £1 million tax-free. The executor of the second estate claims the transfer using form IHT402 alongside the main IHT400 return.⁴

The 40% Rate and the 36% Charity Discount

Value above the combined allowances is taxed at 40%. A Portadown estate of £600,000 with a £500,000 total allowance would owe tax on £100,000, a bill of £40,000. Estates that leave at least 10% of their net value to charity pay a reduced rate of 36% on the remainder.⁵

Exemptions and Lifetime Gifts

Transfers between spouses or civil partners are generally exempt from inheritance tax with no upper limit, provided both partners live permanently in the UK. From April 2025, the older domicile test for these purposes was replaced by one based on long-term UK residence.⁶ Gifts to registered charities and qualifying political parties are also fully exempt.⁷

The Seven-Year Rule

Outright gifts to individuals made during your lifetime become completely free of inheritance tax if you survive seven years. These are called potentially exempt transfers. Die inside seven years and the gift’s value is added back to the estate for tax, with taper relief reducing the tax on the gift itself:

0–3 years before death: no reduction
3–4 years: 20% reduction
4–5 years: 40% reduction
5–6 years: 60% reduction
6–7 years: 80% reduction

Taper relief cuts only the tax charged on the gift. It does not lower the rate on the rest of the estate.

Annual and Small Gift Exemptions

Several smaller exemptions let you give money away without it ever counting toward your estate. The annual exemption is £3,000 per tax year, split across one or more recipients, and unused annual exemption can be carried forward one year. On top of that, you can give up to £250 per person per year to as many people as you like, provided you have not used another exemption on the same person. Wedding or civil partnership gifts of £5,000 to a child, £2,500 to a grandchild, or £1,000 to anyone else are exempt. And there is no cap on regular gifts from surplus income, so long as they come from income rather than capital and do not reduce your standard of living. These exemptions stack: the annual exemption, the small gift allowance, and a wedding gift can all be used for different people in the same tax year.⁷

Business and Agricultural Relief

Business Relief and Agricultural Relief matter a great deal around Portadown, where family farms and small firms make up a large part of the local economy. Both reliefs reduce the taxable value of qualifying assets, and in many cases have allowed a farm or business to pass to the next generation without being sold to cover a tax bill.

Business Relief applies at either 100% or 50% depending on the asset. A sole trader’s business, an interest in a partnership, or shares in an unlisted company get 100% relief. Controlling shareholdings in listed companies and land or buildings used in a business the deceased was a partner in get 50%. The deceased must have owned the asset for at least two years before death.⁸

Agricultural Relief works similarly for farmland, farm buildings, and farmhouses forming part of a working agricultural operation, provided the land was occupied for agricultural purposes for a qualifying period before death.

The £2.5 Million Cap From April 2026

From April 2026, 100% relief for Business Relief and Agricultural Relief combined is capped at £2.5 million per estate. Qualifying assets above the cap get only 50% relief, so the excess is effectively taxed at 20% rather than being fully exempt. The cap was first announced at £1 million in the Autumn Budget 2024 and raised to £2.5 million in December 2025.⁹

Take a farm worth £3.5 million. The first £2.5 million still qualifies for 100% relief and attracts no tax. The remaining £1 million gets 50% relief, leaving £500,000 taxable at 40%, which produces a bill of £200,000 before any nil-rate band is applied. Families who previously assumed full relief would wipe out the entire liability should look again under the new rules.

Reporting the Estate to HMRC

The executor compiles a full inventory of assets and liabilities. For Portadown estates, that usually means a professional valuation of residential or agricultural property reflecting the Northern Ireland market, alongside statements for bank accounts, investments, and life insurance. Debts, including mortgages, credit card balances, and reasonable funeral costs, come off the gross value. HMRC does challenge low valuations, and a formal surveyor’s assessment provides a defensible figure if a query arises.

Estates that owe inheritance tax, or that do not qualify as an “excepted estate,” file the full IHT400 return with HMRC. The IHT400 carries supplementary schedules for different asset types, from property and shares to jointly owned assets and lifetime gifts.¹⁰ Estates below the thresholds that meet certain conditions qualify as excepted estates. For deaths on or after 1 January 2022, the old IHT205 short form is no longer used; excepted estates are reported as part of the probate application itself, with no separate HMRC return.¹¹

Paying the Tax

Inheritance tax must be paid by the end of the sixth month after death. Someone who dies in January has a deadline of 31 July. Interest runs on any unpaid tax after that date, whether or not probate has been granted.¹¹ Before paying, the executor applies for an inheritance tax reference number at least three weeks in advance so HMRC can allocate the funds correctly.

Direct Payment From the Deceased’s Bank

Tax is often due before probate is granted, so the executor cannot yet access accounts in the usual way. The Direct Payment Scheme lets banks and building societies release funds straight to HMRC from the deceased’s accounts. The executor completes form IHT423 for each account and sends it to the bank alongside the IHT400. In Northern Ireland, the probate summary form IHT421 is included as well.¹²

Paying in Instalments

Some assets, particularly property and certain business holdings, cannot easily be turned into cash by the six-month deadline. HMRC allows the tax on these assets to be spread over ten equal annual instalments. The first is due at the same six-month deadline as a lump sum, and each following instalment falls on the same date each year.¹³

Interest is charged on the outstanding balance from the second instalment onward. If the asset is sold during the instalment period, the whole remaining tax becomes due at once. Assets that qualify include the family home (if a beneficiary keeps it), controlling shareholdings, unlisted shares meeting certain value thresholds, and interests in a business run for profit.¹³

1
GOV.UK. How Inheritance Tax Works: Thresholds, Rules and Allowances
2
GOV.UK. Inheritance Tax Thresholds and Interest Rates
3
GOV.UK. Inheritance Tax Nil-Rate Band, Residence Nil-Rate Band From 6 April 2028
4
GOV.UK. Inheritance Tax: Claim to Transfer Unused Nil Rate Band (IHT402)
5
GOV.UK. Inheritance Tax Reduced Rate Calculator
6
GOV.UK. Inheritance Tax Manual – IHTM11033 – Spouse or Civil Partner Exemption
7
GOV.UK. How Inheritance Tax Works: Thresholds, Rules and Allowances – Gifts
8
GOV.UK. Business Relief for Inheritance Tax: What Qualifies for Business Relief
9
House of Commons Library. Changes to Agricultural and Business Property Reliefs for Inheritance Tax
10
HM Revenue & Customs. Inheritance Tax Account (IHT400)
11
GOV.UK. How to Value an Estate for Inheritance Tax and Report Its Value
12
GOV.UK. Pay Your Inheritance Tax Bill: From the Deceased’s Bank, Savings or Investment Account
13
GOV.UK. Pay Your Inheritance Tax Bill: In Yearly Instalments