UK Inheritance Tax Calculator 2025/26

The standard nil-rate band is £325,000 for 2025/26 (frozen until April 2028). If you leave your main residence to direct descendants (children, grandchildren), you can also claim the residence nil-rate band of £175,000, giving a maximum individual allowance of £500,000. Married couples and civil partners can transfer unused allowances, potentially giving a combined threshold of up to £1 million.

IHT is calculated at 40% on the value of an estate that exceeds the nil-rate band threshold. First, calculate the net estate value (assets minus debts and exempt transfers), then deduct the available nil-rate band (£325,000) and residence nil-rate band (£175,000 if applicable). The remaining amount is taxed at 40%, or 36% if at least 10% of the net estate goes to charity.

Yes, any unused nil-rate band and residence nil-rate band can be transferred to a surviving spouse or civil partner. This means a married couple can have a combined allowance of up to £1 million (£650,000 NRB + £350,000 RNRB). The transfer happens automatically when the second spouse dies - you claim the unused percentage from the first death.

Gifts made more than 7 years before death are usually exempt from IHT (Potentially Exempt Transfers). Gifts made within 7 years may still be taxable, but taper relief progressively reduces the tax rate. Gifts in the first 3 years are taxed at 40%, then the rate reduces every year until reaching 0% after 7 years.

Legal ways to reduce IHT include: making gifts within exemption limits (£3,000 annual, £250 small gifts), giving to charity (which also qualifies for 36% rate if 10%+ donated), setting up trusts for estate planning, using Business Property Relief or Agricultural Property Relief on qualifying assets, making gifts that survive 7 years, and lifetime giving from income.

Direct descendants for RNRB purposes include: children (including adopted and step-children), grandchildren and great-grandchildren, foster children who were fostered at any time before age 18, and the spouses/civil partners of any of these. It does not include nieces, nephews, siblings, or other relatives.

IHT is due 6 months after the end of the month in which the person died. The executor or personal representative is responsible for paying IHT from the estate before assets are distributed. For property, you can pay in instalments over 10 years.

Interest is charged on late payments. HMRC form IHT400 must be submitted for taxable estates.

Life insurance payouts form part of your estate and are subject to IHT unless the policy is written in trust. By placing life insurance in trust, the payout goes directly to beneficiaries outside your estate, avoiding IHT entirely. This is a common and effective estate planning strategy. Speak to your life insurance provider about putting existing policies in trust.

The nil-rate band is £325,000 for 2025/26. Estates above this threshold are taxed at 40%. An additional £175,000 Residence Nil Rate Band (RNRB) applies when passing a home to direct descendants.

The estate of the deceased pays IHT, not the beneficiaries directly. The executor is responsible for calculating and paying IHT within 6 months of death from the estate's assets.

Annual gift exemption: £3,000/year (plus unused allowance from previous year). Small gifts: £250 per person per year. Wedding gifts: £5,000 (parent), £2,500 (grandparent), £1,000 (other). Regular gifts from income are exempt if genuinely from surplus income.

Gifts made more than 7 years before death are potentially exempt from IHT. Gifts made 3-7 years before death receive taper relief (reducing from 20% to 0% taper). Gifts within 3 years of death are fully chargeable.

Charitable legacies are fully exempt from IHT. If at least 10% of the estate is left to charity, the IHT rate on the rest reduces from 40% to 36%.

The RNRB (£175,000 in 2025/26) is an additional threshold when a main residence is passed to direct descendants (children, grandchildren). Combined with the £325,000 NRB, this gives up to £500,000 tax-free per person (or £1m for a couple).