Inheritance Tax Calculator (UK)
Inheritance Tax is charged at 40% on estate values above the nil-rate band threshold of £325,000. Married couples can combine allowances for up to £1 million tax-free.
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Many families assume inheritance tax only affects the wealthy, but rising property values mean more estates now exceed the threshold. A common mistake is forgetting that life insurance policies paid outside a trust count towards the estate.
Understanding your potential IHT liability gives you time to plan – whether through lifetime gifts, trusts, or pension arrangements. Enter the estate details below to estimate the bill.
Estate Details
Include property, savings, investments, and possessions minus debts.
What this means for your estate
IHT is charged at 40% on everything above your nil-rate bands. A single person typically gets £325k (NRB) plus up to £175k (Residence NRB) if leaving the family home to direct descendants — totalling £500k. A married couple or civil partnership can combine theirs for up to £1 million tax-free.
If your estate is well above the threshold, the most powerful planning tools are lifetime gifts (7-year rule), pensions (currently outside the estate, though changes are coming), and life cover written in trust. Get your will up to date first — without one, intestacy rules can wipe out spousal IHT exemptions entirely.
How Inheritance Tax Works
What is Inheritance Tax?
Inheritance Tax (IHT) is a tax on the estate (property, money, and possessions) of someone who has died. It's paid to HMRC from the estate before beneficiaries receive their inheritance. IHT applies across the whole of the UK.
When does IHT apply?
IHT is due if the total value of the estate exceeds the nil-rate band threshold. Currently, this threshold is £325,000. Only the value above this threshold is taxed at 40% (or 36% if certain conditions are met).
Spouse and Civil Partner Exemption
If you leave everything to your spouse or civil partner, there is no Inheritance Tax to pay. This is known as the 'spouse exemption' and applies regardless of the estate's value.
Transferable Nil-Rate Band for Married Couples
When the first spouse dies, any unused nil-rate band can be transferred to the surviving spouse's estate. This means if the first spouse leaves everything to their partner (using none of their £325,000 threshold), the surviving spouse can claim a total threshold of £650,000 when they die. Similarly, the residence nil-rate band (£175,000) can also be transferred, potentially giving a married couple or civil partners a combined threshold of up to £1 million.
Residence Nil-Rate Band (RNRB)
If you pass your main residence to your children (including adopted, foster, or stepchildren) or grandchildren, you may qualify for an additional £175,000 allowance. Combined with the nil-rate band, this gives a potential threshold of £500,000 per person, or up to £1 million for a married couple.
RNRB Taper
For estates worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 over the threshold. This means estates over £2.35 million receive no residence nil-rate band.
When is IHT paid?
Inheritance Tax must normally be paid within 6 months of the person's death. The executor or administrator of the estate is responsible for calculating and paying any tax due before assets can be distributed to beneficiaries. Note that beneficiaries who later purchase property may need to pay Stamp Duty on any new purchases.
Current Thresholds & Rates
| Allowance | Amount | Notes |
|---|---|---|
| Nil-rate band | £325,000 | Standard threshold for all estates |
| Residence nil-rate band | £175,000 | If passing home to direct descendants |
| Combined threshold (single) | £500,000 | With residence nil-rate band |
| Combined threshold (couple) | £1,000,000 | Transferable between spouses |
| Standard IHT rate | 40% | On amount above threshold |
| Reduced rate (charity) | 36% | If 10%+ left to charity |
These IHT thresholds are frozen until 5 April 2030. Always verify current rates on GOV.UK.
Worked Examples
Example 1: Estate below threshold
Estate value: £300,000 (no home passed to children)
- • Nil-rate band: £325,000
- • Taxable amount: £0
- • IHT due: £0
Example 2: Estate passing home to children
Estate value: £600,000 (including home passed to children)
- • Nil-rate band: £325,000
- • Residence nil-rate band: £175,000
- • Total threshold: £500,000
- • Taxable amount: £100,000
- • IHT due: £40,000 (40%)
Example 3: Large estate with charity donation
Estate value: £1,000,000 (10%+ left to charity, home to children)
- • Nil-rate band: £325,000
- • Residence nil-rate band: £175,000
- • Total threshold: £500,000
- • Taxable amount: £500,000
- • IHT due: £180,000 (36% charity rate)
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