UK Inheritance Tax Calculator
Estimate the inheritance tax on your estate for the 2025/26 or 2024/25 tax year. Includes the nil-rate band, residence nil-rate band (RNRB) with taper, spouse exemption, transferable allowances, and the reduced charity rate.
Children, grandchildren, etc. — enables the Residence Nil-Rate Band (RNRB)
Inheritance Tax
£0.00
Rate: 40.00%
Total Allowances
£500,000
NRB + RNRB (after taper)
Effective Rate
0.00%
IHT as % of estate
| Item | Amount |
|---|---|
| Total Estate Value | £500,000 |
| Net Estate | £500,000 |
| Nil-Rate Band (NRB) | −£325,000 |
| Residence Nil-Rate Band (RNRB) | −£175,000 |
| Taxable Estate | £0 |
| Inheritance Tax @ 40.00% | £0.00 |
How UK inheritance tax works
Inheritance tax is charged at 40% on the value of your estate above the nil-rate bands. Everyone has a £325,000 nil-rate band (NRB). If your main home passes to direct descendants you add a £175,000 Residence Nil-Rate Band (RNRB), taking the threshold to £500,000. Both bands are frozen until April 2030, so rising house and asset prices pull more estates into the net each year.
Anything left to a spouse or civil partner is fully exempt, and they inherit your unused bands — which is why a surviving partner can pass on up to £1,000,000 free of IHT when a home goes to children. Gifts to UK charities are exempt too, and leaving 10% or more of the net estate to charity cuts the rate on the rest from 40% to 36%.
Gifts and the 7-year rule
Giving assets away during your lifetime is the most common way to reduce IHT, but timing matters. Most gifts to individuals are "potentially exempt transfers": survive 7 years and they leave your estate entirely. Die within 7 years and the gift is added back — though taper relief reduces the tax on gifts made more than 3 years before death (and only once your cumulative gifts exceed the £325,000 NRB).
| Years between gift and death | Taper relief | Effective rate |
|---|---|---|
| 0–3 years | 0% | 40% |
| 3–4 years | 20% | 32% |
| 4–5 years | 40% | 24% |
| 5–6 years | 60% | 16% |
| 6–7 years | 80% | 8% |
Separately, you can give £3,000 a year (the annual exemption, carry forward one year), £250 to any number of people, wedding gifts, and unlimited regular gifts out of surplus income — all immediately exempt with no 7-year wait.
Two reforms to plan around: 2026 and 2027
Business & farm relief — from 6 April 2026
Business Property Relief and Agricultural Property Relief now share one £2.5 million 100% allowance. Qualifying value above it gets only 50% relief — an effective 20% IHT rate. AIM-listed shares fall to 50% relief regardless. The allowance is transferable between spouses.
Pensions into the estate — from 6 April 2027
Most unused defined-contribution pension pots and death benefits become part of the estate for IHT. Spouse and charity beneficiaries stay exempt. This reverses decades of pensions sitting outside IHT and changes the order in which it makes sense to spend pensions versus ISAs and other assets.
Worked examples
Single person, £800,000 estate, home to children
- NRB £325,000 + RNRB £175,000 = £500,000 tax-free.
- Taxable estate: £800,000 − £500,000 = £300,000.
- IHT at 40%: £120,000.
Surviving spouse, £1,000,000 estate, home to children
- Two NRBs (£650,000) + two RNRBs (£350,000) = £1,000,000 of combined threshold.
- Estate of £1,000,000 is fully covered: £0 IHT.
- Above £2,000,000 the RNRB starts to taper away, so larger estates lose this.
Frequently asked questions
What is the inheritance tax threshold in the UK?
The standard nil-rate band (NRB) is £325,000. Below it, no IHT is due. Leave your main home to direct descendants and you add the £175,000 Residence Nil-Rate Band (RNRB), for up to £500,000. Spouses and civil partners can transfer unused allowances, so a surviving partner can have up to £1,000,000 of combined threshold. Both bands are frozen until April 2030.
What is the inheritance tax rate?
40% on the estate above the available nil-rate bands. It drops to 36% if you leave at least 10% of your net estate to charity. Assets passing to a spouse or civil partner, or to a UK charity, are fully exempt regardless of value.
What is the Residence Nil-Rate Band (RNRB)?
An extra £175,000 allowance when your main residence passes to direct descendants (children, grandchildren, including step- and adopted). It tapers for estates over £2,000,000 — losing £1 for every £2 above — and is gone entirely at £2,350,000. It is transferable between spouses, like the main NRB.
How does the 7-year rule on gifts work?
Most gifts to individuals are 'potentially exempt transfers'. If you survive 7 years after making the gift, it falls out of your estate completely. Die within 7 years and the gift counts back into your estate; taper relief reduces the tax (not the gift value) on gifts made 3–7 years before death.
What is gift taper relief?
If you die 3–7 years after a gift that exceeds your nil-rate band, the IHT on that gift is reduced: 20% relief at 3–4 years, 40% at 4–5, 60% at 5–6, and 80% at 6–7 years. Below 3 years there is no relief (full 40%). Taper only helps once cumulative gifts exceed the £325,000 NRB.
Which gifts are exempt from inheritance tax?
Each tax year you can give away £3,000 (the annual exemption, carry forward one year), unlimited small gifts of £250 per person, and wedding gifts (up to £5,000 to a child). Regular gifts out of surplus income are also exempt if they don't reduce your standard of living. Gifts to a spouse or charity are always exempt.
How are business and farm assets changing in 2026?
From 6 April 2026, Business Property Relief and Agricultural Property Relief share a single £2.5 million 100% allowance; qualifying value above it gets only 50% relief (an effective 20% IHT rate). AIM-listed shares drop to 50% relief regardless. The £2.5M allowance is transferable between spouses.
Will pensions be subject to inheritance tax?
From 6 April 2027, most unused defined-contribution pension funds and death benefits become part of the estate for IHT. Spouse and charity beneficiaries stay exempt. This is a major change — pensions have historically sat outside the estate — and reshapes the case for drawing down pensions versus other assets in retirement.
How does the charity rate reduction work?
Leave at least 10% of your net estate (broadly, the estate minus the nil-rate band) to charity and the IHT rate on the rest falls from 40% to 36%. Because the charity gift is itself exempt, this can sometimes leave other beneficiaries with more than a smaller charitable gift would.
How can I reduce my inheritance tax bill?
Use the spouse exemption and transferable bands, make gifts early and survive 7 years, give regularly out of income, leave 10%+ to charity for the 36% rate, hold qualifying business/farm assets within the £2.5M allowance, and consider life insurance written in trust to cover the bill. Specialist advice matters for larger estates.
Sources
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