Inheritance Tax Calculator
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Calculation based on HMRC IHT rates for 2025/26. For guidance only -- seek professional advice for estate planning.
How Inheritance Tax Works
Inheritance Tax (IHT) is charged on the value of a person's estate when they die. The estate includes property, savings, investments, and possessions, minus any debts, funeral expenses and liabilities. If the net estate exceeds the nil-rate band (currently £325,000), IHT is charged at 40% on the excess.
The personal representatives of the deceased (executors or administrators) are responsible for calculating and paying IHT, usually before probate is granted. IHT must typically be paid within 6 months of the end of the month of death, though property-related IHT can be paid in instalments over 10 years.
Nil-Rate Band (NRB) and Residence Nil-Rate Band (RNRB)
Nil-Rate Band -- £325,000
The nil-rate band is the tax-free threshold for IHT. It has been frozen at £325,000 since 2009 and is set to remain at this level until at least April 2028. Any estate value below this amount is not subject to IHT.
If the deceased was married or in a civil partnership and their spouse died before them, any unused portion of the first spouse's NRB can be transferred to the surviving spouse, potentially doubling the NRB to £650,000.
Residence Nil-Rate Band -- £175,000
The RNRB provides an additional £175,000 allowance when a home is left to direct descendants (children, grandchildren, stepchildren). Combined with the NRB, this gives a potential tax-free allowance of £500,000 per person, or £1,000,000 for a married couple.
| Allowance | Amount (2025/26) | Notes |
|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | Frozen until April 2028 |
| Residence Nil-Rate Band (RNRB) | £175,000 | Home must pass to direct descendants |
| Transferable NRB (married) | Up to £650,000 | Unused NRB from deceased spouse |
| Transferable RNRB (married) | Up to £350,000 | Unused RNRB from deceased spouse |
| Combined maximum (couple) | £1,000,000 | NRB + RNRB for both spouses |
Taper Relief on Gifts
If you make gifts during your lifetime and die within 7 years, those gifts may be subject to IHT. However, taper relief reduces the amount of tax charged on gifts made between 3 and 7 years before death. Gifts made more than 7 years before death are completely exempt.
| Years Before Death | Taper Relief | Effective IHT Rate (at 40%) |
|---|---|---|
| 0 - 3 years | 0% (no relief) | 40% |
| 3 - 4 years | 20% | 32% |
| 4 - 5 years | 40% | 24% |
| 5 - 6 years | 60% | 16% |
| 6 - 7 years | 80% | 8% |
| Over 7 years | 100% (fully exempt) | 0% |
Gift Exemptions
Several types of gifts are exempt from IHT regardless of when they are made:
- Annual exemption: Up to £3,000 per tax year (unused allowance can be carried forward one year)
- Small gifts: Up to £250 per person per tax year (unlimited recipients)
- Wedding gifts: Up to £5,000 from a parent, £2,500 from a grandparent, £1,000 from anyone else
- Gifts from income: Regular gifts from surplus income that do not affect your standard of living
- Gifts to charities: Fully exempt, no limit
- Gifts between spouses: Fully exempt, no limit (both must be UK-domiciled)
Worked Examples
Example 1: Estate Below NRB
Example 2: Home to Children, £750k Estate
Example 3: £2.5m Estate, RNRB Tapered
Frequently Asked Questions
Inheritance Tax is a tax on the estate (property, money and possessions) of someone who has died. It is charged at 40% on the value above the nil-rate band of £325,000. Certain exemptions and reliefs can reduce or eliminate the liability.
The nil-rate band (NRB) is the tax-free threshold for IHT, currently set at £325,000. The portion of your estate up to this amount is not subject to IHT. Any unused NRB from a deceased spouse can be transferred to the surviving spouse, potentially giving a combined NRB of £650,000.
The RNRB is an additional allowance of £175,000 that applies when you leave your main home to direct descendants (children, grandchildren, stepchildren). Combined with the standard NRB, this provides a total tax-free allowance of £500,000 per person. However, the RNRB is tapered away for estates worth over £2 million.
Gifts made within 7 years of death may be subject to IHT if they exceed the nil-rate band. Taper relief reduces the tax payable on gifts made between 3 and 7 years before death. Some gifts are always exempt, including the annual £3,000 exemption, small gifts of up to £250, and gifts between spouses.
Yes. Transfers between spouses and civil partners are fully exempt from IHT, with no upper limit, provided both are UK-domiciled. The deceased's unused nil-rate band and RNRB can also be transferred to the surviving spouse for use on their eventual death.
If you leave at least 10% of your net estate (after deducting the NRB and any exemptions) to charity, the IHT rate on the remaining taxable estate is reduced from 40% to 36%. In some cases, this can mean beneficiaries actually receive more, because the 4% rate reduction offsets the charitable donation.