UK Inheritance Tax (IHT) Calculator 2026-27
Planning ahead — understand what your estate may owe.
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.
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 and AIM shares
Qualifying business assets held 2+ years receive 50% or 100% BPR. Many AIM-listed shares qualify — making AIM ISA portfolios a popular planning tool for those willing to accept higher volatility. From 2026, some restrictions on BPR for agricultural and business property come into force.
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 reduced by £1 per £2 over £2,000,000: £250,000 excess removes £125,000 of RNRB per person. Effective nil-rate band: £650,000 NRB + £50,000 reduced RNRB = £700,000. Taxable: £1,800,000. IHT at 40%: £720,000.
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. From April 2027, most DC pension funds will fall within IHT — a major shift under current consultation.
Defined benefit pensions
Typically pay a spouse's or dependant's pension that is not assessed for IHT. Some schemes also pay a lump sum death benefit, usually trustee-discretionary and outside the estate.
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 from April 2027 most will fall within the IHT net.
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 in years 4–7 before death benefit from taper relief that reduces the IHT charge.
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 50% or 100% IHT relief after 2 years of ownership. Many AIM-listed shares also qualify, making AIM portfolios a popular IHT planning tool.
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 income tax, National Insurance, VAT, and capital gains tax.
- Income Tax rates & Personal Allowance — GOV.UK — Income Tax rates and Personal Allowances.
- National Insurance rates & thresholds — GOV.UK — National Insurance rates and categories.
- Personal Allowance taper (£100k+) — GOV.UK — Income over £100,000.
- Capital Gains Tax rates & allowance — GOV.UK — Capital Gains Tax rates.
- Dividend Tax — GOV.UK — Tax on dividends.
- ISA annual allowance — GOV.UK — Individual Savings Accounts.
Last checked: April 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 estimated tax position based on the income, deductions, and offsets you entered — using current published tax rates and thresholds.
Use this to understand your tax position before lodging. Compare scenarios — a salary sacrifice, additional deduction, or income change — to see how each affects your tax.
Not a Self Assessment return or HMRC determination. Your actual tax outcome depends on your full Self Assessment, including items not modelled here. Consult a chartered accountant or tax adviser for complex situations.
Uses current published rates and thresholds. All calculations run in your browser — no data is stored or sent to any server.
Tax results are driven by your total taxable income, marginal rate bracket, and eligible deductions. The interaction between these three determines your effective tax rate.
Each dollar above a threshold is taxed at the next rate. Moving from the 20% to the 40% bracket doesn't mean all income is taxed at 40% — only the portion above the threshold.
Deductions reduce taxable income (saving at your marginal rate). Offsets reduce tax payable pound-for-pound. An offset is worth more than a deduction of the same amount.
To reduce your tax, focus on legitimate strategies that shift income timing, increase deductions, or take advantage of concessional structures.
Claim all eligible work-related expenses, home office costs, and investment deductions. A tax agent can identify deductions you may be missing.
Contributions up to the concessional cap are taxed at 15% inside super instead of your marginal rate — an immediate saving for anyone above the 19% bracket.
Prepaying deductible expenses before 5 April (UK tax year end) or deferring income into the next tax year can shift your liability between tax years.
Tax is connected to income, super, and investment decisions. Use these calculators to model the adjacent factors.
See exactly how much reaches your bank account after income tax, National Insurance, and any Student Loan deductions.
Pay calculator →See the tax benefit of additional salary sacrifice or voluntary super contributions.
Super contributions →If you're selling an asset, model the CGT impact including the 50% discount for assets held over 12 months.
CGT calculator →