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Life Events · 2025/26 thresholds

Inheritance Tax Calculator

UK Inheritance Tax is 40% on estate value above the £325,000 Nil-Rate Band — plus up to £175,000 more if you leave the family home to descendants, plus up to a full double of both if inheriting from a spouse.

The estate

£

Property + investments + cash + chattels, after debts/funeral costs.

100% if your spouse used none of their allowances. Doubles both NRB and RNRB.

Inheritance Tax due

£100,000

Effective rate 13.3% on the whole estate

Allowances

  • Estate value
    £750,000
  • Nil-Rate Band (NRB)
    −£325,000
  • Residence NRB
    −£175,000
  • Taxable estate
    £250,000
  • IHT at 40%
    £100,000

How we calculated your result

The formula in plain English:

  1. Everyone gets a Nil-Rate Band of £325,000 — the first £325k of your estate pays £0 IHT.
  2. If you leave the family home to children (or grandchildren), you get an extra £175,000 Residence NRB on top.
  3. If you’re a widow(er) and your spouse used none of their allowances, you inherit theirs too — up to £1m combined.
  4. 40% is paid on everything above the total allowances.

NB: the RNRB tapers when the estate exceeds £2m — losing £1 of RNRB per £2 of excess. It’s fully gone at £2.35m (single) or £2.7m (combined).

Official UK rules in simple English

Key statutory points (Inheritance Tax Act 1984 as amended):

  • Nil-Rate Band frozen at £325,000 until at least April 2030.
  • Residence NRB frozen at £175,000 to April 2030, taper threshold £2,000,000.
  • Standard rate 40%, reduced to 36% if 10%+ of net estate is left to qualifying charities.
  • Spousal exemption: unlimited transfers between UK-domiciled spouses/civil partners.
  • 7-year gift rule: lifetime gifts become exempt after 7 years; if you die within 7 years they fall back into the estate, with taper relief on tax (not the gift itself) after year 3.
  • Reliefs not modelled: Business Property Relief, Agricultural Property Relief, gifts out of normal expenditure.

Common pitfalls to watch out for

  • ⚠ The £2m taper is a cliff for property-rich estates

    A £2.5m estate (very common in London/SE) loses the entire £175k RNRB — that’s £70,000 of extra IHT just from crossing the threshold. Lifetime gifts to bring the estate under £2m at death can recover the RNRB.

  • ⚠ RNRB only applies to direct descendants

    Children, stepchildren, adopted, fostered and grandchildren count. Nieces, nephews, siblings, friends do not. Leaving the home to anyone else loses the RNRB completely.

  • ⚠ Joint accounts and pensions complicate things

    Jointly-held assets typically pass outside the estate by survivorship. Most pensions sit outside IHT — though from April 2027 most defined-contribution pots will be brought inside the IHT net. Big change coming.

  • ⚠ Gifts within 7 years still count

    Gave £200k to your kids 5 years before dying? It comes back into the estate, eats your NRB first, and taper relief only reduces the IHT rate on tax — not the gift value.

Frequently asked questions

Who pays the IHT bill?
Normally the executor pays IHT from estate funds before distributing the inheritance. For gifts within 7 years, the recipient may be liable if the estate can’t cover it.
When is IHT due?
Six months from the end of the month of death. Probate is usually blocked until IHT400 is filed and (often) paid. Property IHT can be paid in 10 annual instalments.
Does my pension count?
Currently, most defined-contribution pensions sit outside the estate for IHT. From 6 April 2027 the government plans to bring them inside. Defined-benefit lump sums vary by scheme.

Estimate only. Excludes BPR/APR reliefs, 7-year gift rules, trusts, charitable rate reduction, and non-domicile rules. Take professional advice for any real estate plan.

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