What assets are included in an estate for inheritance tax?
Answered 11 March 2026
Assets Included in an Estate for Inheritance Tax
What the law says
The core definition is found in IHTA 1984, s.5(1): a person's estate is "the aggregate of all the property to which he is beneficially entitled", subject to certain exceptions.
Specific inclusions and rules:
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General powers of disposal: A person who holds a general power enabling them to dispose of any property (other than settled property), or to charge money on any property, is treated as beneficially entitled to that property or money.
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Interests in possession in settled property: Under IHTA 1984, s.49(1), a person beneficially entitled to an interest in possession (IIP) in settled property is treated as beneficially entitled to the underlying property itself. However, for IIPs acquired on or after 22 March 2006, this only applies if the interest is an immediate post-death interest, a disabled person's interest, or a transitional serial interest.
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Gifts with reservation of benefit: Under FA 1986, s.102(3), if immediately before the donor's death there is any property subject to a reservation, that property is treated as property to which the donor was beneficially entitled immediately before death (to the extent it would not otherwise form part of the estate).
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Liabilities are deducted: In determining the value of a person's estate, liabilities at that time are taken into account, except as otherwise provided. Liabilities not imposed by law are only taken into account to the extent incurred for consideration in money or money's worth.
Key exclusions from the estate:
- Excluded property (e.g. overseas property where the beneficial owner is not a long-term UK resident; certain authorised unit trust holdings and OEIC shares for non-long-term UK residents; qualifying government securities in beneficial ownership of qualifying persons; relevant decorations/awards never sold).
- Foreign-owned works of art situated in the UK solely for public display, cleaning or restoration.
- Certain interests in possession in settled property that fall within s.5(1A) (post-22 March 2006 IIPs that are not immediate post-death interests, disabled person's interests or transitional serial interests), unless they fall within s.5(1B).
- Interests in possession in bereaved minor trusts (s.71A) and age 18-to-25 trusts (s.71D).
HMRC guidance / practice
HMRC confirms that the estate definition means all property to which a person is beneficially entitled, and that items of property may be taken together even if held under separate titles and whether or not all parts are chargeable to tax.
The "estate concept" is described by HMRC as one of the most important features of IHT — it requires different parts of the same property owned by different parts of an estate to be brought together for valuation.
On settled property with an IIP: HMRC confirms that where a person has an IIP in settled property, they are treated as beneficially entitled to the underlying settled property, meaning it forms part of their estate. On death, tax is charged under IHTA 1984, s.4(1).
On gifts with reservation: HMRC confirms that property gifted but subject to a reservation at the transferor's death is deemed to be property to which they were beneficially entitled immediately before death (except to the extent it already forms part of their estate), and must be valued at the date of death.
On residuary estates: For IHT purposes, the deceased is treated as having a direct interest in the net assets of the residuary estate, and the situs of each underlying asset must be considered separately (relevant, for example, to whether excluded property provisions apply).
Citation sources
PART I GENERAL Main charges and definitions Meaning of estate. 5 1 For the purposes of this Act a person’s estate is the aggregate of all the property to which he is beneficially entitled, except that— a the estate of a person— i does not include an interest in possession in settled property to which section 71A or 71D below applies, and ii does not include an interest in possession that falls within subsection (1A) below unless it falls within subsection (1B) below , and b the estate of a perso
When someone has an interest in possession (IIP) (IHTM16000) in settled property they are treated as beneficially entitled (IHTM04031) to the underlying settled property, IHTA84/S49 (1). This means that the property is treated as forming part of their estate (IHTM04029). When someone entitled to an IIP in any settled property dies, tax (if due) is therefore charged under IHTA84/S4 (1). Where a person becomes beneficially entitled to an IIP on or after 22 March 2006, S49 (1) only applies if the i
Inheritance tax is charged by reference to the value transferred by a chargeable transfer (IHTM04021). The way that we go about valuing assets is therefore fundamental to the charge. The general rule is that the value of any asset is its ‘open market value’ (IHTM09703). However, some specific assets (IHTM09702) need special attention and the IHT legislation, as interpreted by case law, contains other rules that tell you when you should value items separately (IHTM09715) and when you should bring
ables him, or would if he were sui juris enable him, to dispose of any property other than settled property, or to charge money on any property other than settled property, shall be treated as beneficially entitled to the property or money; and for this purpose “ general power ” means a power or authority enabling the person by whom it is exercisable to appoint or dispose of property as he thinks fit. 3 In determining the value of a person’s estate at any time his liabilities at that time shall
The definition of a person’s estate (IHTM04029) is the aggregate of all property (IHTM04030) to which a person is beneficially entitled, (IHTM04031) except that the estate of a person immediately before his death does not include excluded property (IHTM04251). This means that in valuing an estate, items of property may be taken together, even if held under separate titles and whether or not all the various parts of the estate are chargeable to tax, see IHTM04331.This aspect of valuation applies
PART V INHERITANCE TAX Gifts with reservation. 102 1 Subject to subsections (5), (6) and (7A) below, this section applies where, on or after 28th March 1986, an individual disposes of any property by way of gift and either— a possession and enjoyment of the property is not bona fide assumed by the donee at or before the beginning of the relevant period; or b at any time in the relevant period the property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor
If the property (IHTM04030) gifted is subject to a reservation when the transferor dies, it is deemed to be property to which they were beneficially entitled (IHTM04031) immediately before their death (except to the extent that the property forms part of their estate anyway), FA86/S102 (3). So, the property is part of the transferor’s estate, (IHTM04029) unless it is excluded property, (IHTM04251) and has to be valued at the date of death.
PART III SETTLED PROPERTY CHAPTER II INTERESTS IN POSSESSION, REVERSIONARY INTERESTS AND SETTLEMENT POWERS Treatment of interests in possession. 49 1 A person beneficially entitled to an interest in possession in settled property shall be treated for the purposes of this Act as beneficially entitled to the property in which the interest subsists. 1A Where the interest in possession mentioned in subsection (1) above is one to which the person becomes beneficially entitled on or after 22nd March 2
In general, a person who takes an absolute interest in the residue of an estate is entitled, not to the assets of the testator, but to a right of action, enforceable against the executors. This is the case under English law and many other legal systems. This means the executors must administer the estate and transfer the clear residue, or a share of it to the beneficiary. The same rule applies in the case of intestacy. This is a similar rule to the jus crediti (IHTM25091) to which a beneficiary
PART I GENERAL Main charges and definitions Excluded property. 6 1 Property situated outside the United Kingdom is excluded property if the person beneficially entitled to it is an individual who is not a long-term UK resident . 1A A holding in an authorised unit trust and a share in an open-ended investment company is excluded property if the person beneficially entitled to it is an individual who is not a long-term UK resident . 1B A relevant decoration or award is excluded property if it has