Translation unavailable - this article is shown in English. View English version
Summary
Inheritance Tax (IHT) is charged at 40% on the value of an estate above the nil-rate band (£325,000). An additional residence nil-rate band (£175,000) applies when a home is left to direct descendants. Transfers between spouses are fully exempt, and unused allowances can be transferred to the surviving spouse, giving a married couple a combined allowance of up to £1 million.
How it works
The nil-rate band (NRB)
The first £325,000 of an estate is taxed at 0% (the nil-rate band). This threshold has been frozen since 2009 and will remain at £325,000 until at least April 2030.
Residence nil-rate band (RNRB)
An additional £175,000 allowance is available when a qualifying residential property is left to direct descendants (children, grandchildren, stepchildren). This gives individuals a combined IHT-free allowance of £500,000.
The RNRB tapers away for estates valued over £2 million, reducing by £1 for every £2 above the threshold. It is completely lost at estate values of £2.35 million.
Spouse/civil partner exemption
Transfers between married couples or civil partners are completely exempt from IHT, regardless of value. Additionally, any unused NRB or RNRB can be transferred to the surviving spouse, allowing a combined allowance of up to:
- £1 million (£325,000 + £175,000 from each spouse)
The calculation
IHT = (Net estate value - NRB - RNRB - Exemptions) x 40%
A reduced rate of 36% applies if at least 10% of the net estate is left to charity.
Gifts and the 7-year rule
Gifts made during your lifetime become exempt from IHT if you survive for 7 years after making them. Gifts made 3-7 years before death are subject to taper relief:
| Years before death | Tax rate |
|---|---|
| 0-3 | 40% |
| 3-4 | 32% |
| 4-5 | 24% |
| 5-6 | 16% |
| 6-7 | 8% |
| 7+ | 0% |
Worked example
Estate: £750,000 (including home worth £400,000), left to children, not married
- Net estate: £750,000
- Nil-rate band: £325,000
- Residence nil-rate band: £175,000 (home left to children)
- Taxable estate: £750,000 - £325,000 - £175,000 = £250,000
- IHT: £250,000 x 40% = £100,000
Married couple, same estate:
If the first spouse dies and leaves everything to the surviving spouse:
- No IHT on first death (spouse exemption)
- Surviving spouse inherits unused NRB (£325,000) and RNRB (£175,000)
- On second death, available allowances: £325,000 + £325,000 + £175,000 + £175,000 = £1,000,000
- Estate of £750,000 is fully covered — IHT = £0
Inputs explained
- Estate value — total value of all assets (property, savings, investments, possessions)
- Debts and liabilities — mortgages, loans, funeral costs (deducted from estate)
- Marital status — determines spouse exemption and transferable allowances
- Property value — for RNRB eligibility
- Beneficiaries — whether the estate passes to direct descendants (for RNRB)
- Charitable bequests — for the 36% reduced rate
Outputs explained
- Net estate — estate value minus debts
- Available allowances — NRB + RNRB + any transferred from spouse
- Taxable estate — the amount subject to IHT
- IHT due — the tax payable
- Effective rate — IHT as a percentage of the total estate
Assumptions & limitations
- The calculator models a single death and does not fully project the complex interaction of multiple deaths and transfers.
- Business Property Relief and Agricultural Property Relief can provide 50-100% relief but are subject to specific conditions not modelled here.
- Changes announced in the Autumn Budget 2025 will bring pensions into the IHT estate from April 2027 and reform agricultural/business reliefs.
- Trusts can reduce IHT but have their own tax regime not covered by this calculator.
- The NRB and RNRB thresholds are frozen until at least April 2030.