UK Inheritance Tax (IHT) Calculator 2026-27
Estimate UK Inheritance Tax on an estate. Enter the total estate value. Optionally include married couple allowances and the Residence Nil-Rate Band for property left to children. The nil-rate band is £325,000 and IHT is 40% above that.
Planning ahead — understand what your estate may owe.
Estimates only. IHT rules are complex — consult a solicitor or tax specialist.
How UK inheritance tax is calculated
IHT is charged at 40% on the value of an estate above the available nil-rate bands. Understanding the calculation requires walking through five stages: valuing the estate, subtracting exempt transfers, applying the nil-rate band, applying the residence nil-rate band, and applying the 40% rate to whatever remains.
Step 1: Value the gross estate at date of death
The gross estate includes property, savings, investments, personal possessions, business interests, and the deceased's share of jointly-owned assets. Market value is used, not purchase price. Property is usually professionally valued if the estate is likely to exceed the nil-rate band.
Step 2: Deduct debts and funeral expenses
Outstanding mortgages, loans, credit card balances, utility bills, and reasonable funeral costs are deducted to arrive at the net estate. Legally-binding debts the deceased owed at death reduce the taxable estate pound for pound.
Step 3: Apply the nil-rate band (£325,000)
The first £325,000 of the net estate is taxed at 0%. If the deceased's spouse or civil partner died first without using all their NRB, the unused percentage can be transferred — so a widow/widower can shield up to £650,000.
Step 4: Apply the Residence Nil-Rate Band (£175,000)
If a main home (or share of one) is left to direct descendants, an additional £175,000 nil-rate band applies per person. This can also be transferred between spouses, giving a couple a potential combined £1,000,000 tax-free threshold.
Step 5: Calculate 40% IHT on the excess
Whatever remains of the net estate after all nil-rate bands is taxed at 40%. If 10% or more of the net estate (after NRBs) is left to charity, the rate drops to 36% on the rest — a £4,000 tax saving per £100,000 of taxable estate.
UK inheritance tax thresholds and rates 2026-27
Combined nil-rate band by household type
| Scenario | Total nil-rate band | IHT below this |
|---|---|---|
| Single, no home to descendants | £325,000 | Nil |
| Single, home left to children | £500,000 | Nil |
| Married couple, no home | £650,000 | Nil |
| Married couple, home to children | £1,000,000 | Nil |
How the RNRB tapers on estates over £2,000,000
RNRB is reduced by £1 for every £2 the estate value exceeds £2,000,000. A single estate of £2,350,000+ loses RNRB entirely; for a couple combining both RNRBs, the taper zone runs £2,000,000–£2,700,000. Asset gifting before death can preserve RNRB by bringing the estate below the £2m threshold.
Tax rates: standard 40% and reduced 36% rate
The main IHT rate is 40% on estate value above available NRBs. A reduced 36% rate applies where 10% or more of the net chargeable estate is left to qualifying charities — effectively a tax reduction paid for by HMRC. The 36% rate can make charitable legacies near tax-neutral for the remaining beneficiaries.
The 7-year rule and taper relief explained
Gifts made during your lifetime may still be subject to IHT if you die within 7 years. Taper relief reduces the IHT charge on gifts made between 3 and 7 years before death.
Taper relief rates by years between gift and death
| Years between gift and death | Taper relief | Effective IHT rate |
|---|---|---|
| Less than 3 years | 0% | 40% |
| 3 to 4 years | 20% | 32% |
| 4 to 5 years | 40% | 24% |
| 5 to 6 years | 60% | 16% |
| 6 to 7 years | 80% | 8% |
| More than 7 years | 100% | 0% (fully exempt) |
Potentially Exempt Transfers (PETs) vs Chargeable Lifetime Transfers
Most gifts to individuals are PETs — they become fully IHT-exempt after 7 years. Gifts into discretionary trusts are Chargeable Lifetime Transfers with a 20% upfront IHT charge if over the NRB. The type of recipient changes how the 7-year clock is treated.
Annual gift exemptions that reset each year
The £3,000 annual gift exemption applies every tax year regardless of the 7-year rule. Small gifts up to £250 per person per year, wedding gifts (up to £5,000 from a parent), and regular gifts from surplus income are all immediately exempt — meaning they never count towards the 7-year totals.
How to reduce UK inheritance tax legally
Careful planning can significantly reduce — and sometimes entirely eliminate — an IHT liability. The most common strategies combine lifetime gifting, trust structures, pensions, and reliefs for specific asset classes.
Annual gifting and the 7-year clock
Using the £3,000 annual exemption every year, plus starting the 7-year clock on larger gifts, gradually moves wealth out of the estate. A couple can gift £6,000/year plus any unused prior-year allowance (£12,000 total possible) without any IHT implication.
Gifts out of surplus income
Regular gifts paid from income (not capital) are immediately outside the estate if they are part of a regular pattern and don't reduce the giver's standard of living. This is one of the most powerful and under-used IHT exemptions.
Charitable legacy and the 36% rate
Leaving 10% or more of the net chargeable estate to a UK-registered charity triggers the reduced 36% rate. In many cases, the family receives a similar amount after tax as they would have with no charity legacy, because the tax saving offsets the charity gift.
Business Property Relief after the April 2026 reform
Qualifying business assets held for at least 2 years still attract Business Property Relief, but the rules changed for deaths on or after 6 April 2026. A £2,500,000 allowance now covers the combined value of property qualifying for 100% agricultural property relief and 100% business property relief; value above the allowance drops to 50% relief. Any unused allowance transfers to a surviving spouse or civil partner, so a couple can shelter up to £5,000,000 at the 100% rate on top of their nil-rate bands.
AIM shares are no longer a 100% relief route
The same reform cut relief on shares traded on markets HMRC does not treat as “listed” — which is how AIM is classified — from 100% to 50% in all circumstances, with no access to the £2,500,000 allowance. An AIM portfolio held for 2+ years therefore faces an effective IHT rate of 20% (40% charged on half the value) rather than nothing. AIM holdings still reduce an IHT bill relative to cash or listed equities, but the halved relief and the higher volatility of the market make the trade-off much narrower than before April 2026.
Life insurance written in trust
A whole-of-life insurance policy written in trust pays a lump sum outside the estate on death, providing liquidity for the IHT bill without itself being taxed. Typically used by families with illiquid estates (business, property) to cover the anticipated IHT charge.
Pensions as an IHT planning vehicle
Defined contribution pensions are currently outside the estate — making them one of the most efficient ways to pass on wealth. However, from April 2027, most unused pension funds will be brought within the IHT net. Review pension withdrawal and beneficiary nomination strategies before this change takes effect.
UK inheritance tax worked examples by estate value
£500,000 estate — single person, no home to children
NRB covers £325,000. Taxable estate: £175,000. IHT at 40%: £70,000. Beneficiaries receive £430,000.
£800,000 estate — single person with property to children
NRB + RNRB covers £500,000. Taxable estate: £300,000. IHT at 40%: £120,000. Beneficiaries receive £680,000.
£1,000,000 estate — married couple, home to children
Combined NRB + RNRB covers £1,000,000. Taxable estate: £0. IHT: nil. Beneficiaries receive the full £1,000,000.
£2,000,000 estate — married couple with home and investments
Combined nil-rate bands cover £1,000,000. Taxable estate: £1,000,000. IHT at 40%: £400,000. Beneficiaries receive £1,600,000.
£2,500,000 estate — RNRB taper zone
RNRB is reduced by £1 for every £2 the estate exceeds £2,000,000: the £500,000 excess strips £250,000 from the £350,000 combined RNRB, leaving £100,000. Effective nil-rate band: £650,000 NRB + £100,000 reduced RNRB = £750,000. Taxable: £1,750,000. IHT at 40%: £700,000.
Pensions, ISAs, and life insurance under IHT rules
Defined contribution pensions (SIPP, workplace DC)
Currently outside the estate for IHT. Passed to nominated beneficiaries at trustees' discretion. Finance Act 2026 brings most unused DC pension funds and pension death benefits inside the estate for deaths on or after 6 April 2027, with personal representatives responsible for reporting and paying the tax.
Defined benefit pensions
Typically pay a spouse's or dependant's pension that is not assessed for IHT — and dependants' scheme pensions from a defined benefit arrangement stay outside the IHT net after April 2027, as do death-in-service benefits paid from a registered pension scheme.
ISAs and general investment accounts
Both fully part of the estate. ISAs lose their tax-free wrapper on death, but spouses can claim an Additional Permitted Subscription matching the deceased's ISA value.
Life insurance policies
If not in trust, payouts form part of the estate. Writing a policy in trust takes the payout outside the estate and usually accelerates payment to beneficiaries by avoiding probate.
Property and joint ownership
Joint tenant property passes by survivorship — but the deceased's share is still part of the estate for IHT. Tenants-in-common arrangements allow a share to be left via will to non-spouse beneficiaries.
FAQFrequently asked questions about UK inheritance tax
When is IHT paid?
IHT must be paid within 6 months of the end of the month of death. Interest accrues after that. For property and business assets, payment can sometimes be spread over 10 years. Executors are responsible for calculating and paying IHT before assets are distributed.
Does IHT apply to ISAs and pensions?
ISAs: the value of your ISA is included in your estate and potentially subject to IHT. However, a surviving spouse can inherit your ISA allowance. DC pensions are currently outside the estate — but under Finance Act 2026 most unused pension funds fall within the IHT net for deaths on or after 6 April 2027.
How much can you inherit tax-free in the UK?
Up to £500,000 for a single person with a home left to direct descendants, or £1,000,000 for a married couple combining both nil-rate bands and residence nil-rate bands.
What is the 7-year rule for gifts?
Gifts given more than 7 years before death are generally IHT-free. Gifts made 3 to 7 years before death benefit from taper relief that reduces the IHT charge, and taper relief only applies where the gifts made in those 7 years come to more than the £325,000 nil-rate band.
Does life insurance count for IHT?
Only if it is not written in trust. Writing a life insurance policy in trust takes it outside the estate and avoids the 40% IHT charge on the sum assured.
How does Business Property Relief work?
Qualifying business assets can receive 100% or 50% IHT relief after at least 2 years of ownership. For deaths on or after 6 April 2026 the 100% rate is capped by a £2,500,000 allowance for agricultural and business property combined, with 50% relief above it — and any unused allowance passes to a surviving spouse or civil partner. AIM shares were reformed at the same time: shares traded on markets HMRC does not treat as “listed” now get 50% relief in all circumstances and cannot use the allowance, so they carry an effective IHT rate of 20% rather than nil.
Where these figures come from
Every threshold and tax rate on this page is taken from HM Revenue & Customs (HMRC) via GOV.UK — the source of record for UK Inheritance Tax, income tax, National Insurance, and capital gains tax.
- Nil-rate band & the 40% / 36% rates — GOV.UK — How Inheritance Tax works: thresholds, rules and allowances.
- Residence Nil-Rate Band & the £2m taper — GOV.UK — Passing on a home.
- The 7-year rule, taper relief & gift exemptions — GOV.UK — Rules on giving gifts.
- Business Property Relief — what gets 100% and 50% — GOV.UK — What qualifies for Business Relief.
- The April 2026 APR/BPR reform & AIM shares — GOV.UK — Reforms to agricultural property relief and business property relief.
- Pensions inside the estate from April 2027 — GOV.UK — Inheritance Tax: unused pension funds and death benefits.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
Select the question that matches where you are right now.
Your result shows the Inheritance Tax an estate of the value you entered would be estimated to owe, after the nil-rate bands available to it — using HMRC's published 2026-27 thresholds.
Use it to see roughly what the estate would owe if death happened today. Compare scenarios — claiming the Residence Nil-Rate Band, transferring a spouse's unused nil-rate band, or leaving 10% to charity — to see how each moves the bill.
Not an IHT400 account or an HMRC determination. Trusts, business and agricultural property relief, foreign assets, and gifts with reservation of benefit are not modelled here. Speak to a solicitor or a STEP-qualified adviser before acting.
Uses HMRC's published nil-rate band, Residence Nil-Rate Band, and IHT rates. All calculations run in your browser — GlobalCalc does not store your figures as calculator records, and the calculator code does not submit them to obtain a result.
An IHT bill is driven by three things: the net value of the estate, the nil-rate bands it can claim, and the gifts made in the 7 years before death.
IHT is not banded like income tax. Every pound below the available nil-rate bands is taxed at 0%, and every pound above them at 40% — so each extra £10,000 of estate value costs £4,000 in tax.
The £325,000 nil-rate band, a deceased spouse's unused band, and the £175,000 Residence Nil-Rate Band each reduce the taxable estate pound for pound. Debts and reasonable funeral costs come off the gross estate before any of them apply.
Above £2,000,000 the Residence Nil-Rate Band falls by £1 for every £2 of excess. Estates just over that line lose it quickly — £500,000 of excess strips £250,000 of RNRB.
Reducing an IHT bill legitimately comes down to moving value out of the estate early, claiming every band the estate is entitled to, and using the reliefs attached to specific assets.
The £3,000 annual exemption, £250 small gifts, wedding gifts, and regular gifts out of surplus income leave the estate immediately. Larger gifts need you to survive 7 years to drop out of the estate completely.
Leaving 10% or more of the net chargeable estate to a UK-registered charity cuts the IHT rate on the rest from 40% to 36% — which often leaves the family in a similar position after tax.
A whole-of-life policy written in trust pays out outside the estate, giving executors the cash to settle IHT on an illiquid estate without adding to the bill itself.
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