If your spouse/civil partner has died and did not use all their IHT allowances, the unused portion can be transferred to you.
Gifts made within 7 years of death may be subject to IHT. Taper relief may reduce the tax on older gifts.
UK Inheritance Tax Calculator: Calculate Estate Tax Liability Updated February 2026
Calculate Your Inheritance Tax Instantly
See how much IHT could be due on your estate. Plan your estate and understand allowances.
Use Calculator NowKey Takeaways
- Nil-Rate Band: £325,000 tax-free (frozen until 2028)
- Tax Rate: 40% on value above nil-rate band
- Residence Nil-Rate Band: Up to £175,000 additional for main home
- Spouse Exemption: Unlimited transfers to spouse/civil partner
- Taper Relief: Gifts made 3-7 years before death taxed at reduced rates
Inheritance Tax (IHT) is a tax on the value of your estate when you die. With the nil-rate band frozen and property values rising, more estates are becoming liable for IHT. Our free UK Inheritance Tax calculator helps you estimate potential IHT liability on your estate and understand available allowances and reliefs.
Proper planning can significantly reduce your IHT liability. Understanding the allowances, reliefs, and exemptions available can help you pass on more of your wealth to your beneficiaries rather than to the tax authorities.
What Is Inheritance Tax?
Inheritance Tax is a tax on the value of your estate when you die. Key features:
- Based on Estate Value: All assets owned at death minus liabilities and debts
- Payment Deadline: Typically 6 months after death
- Rate Structure: 40% on value above nil-rate band
- Executor Responsibility: Executors manage the estate and handle IHT payment
How Does Inheritance Tax Work?
IHT works by applying the tax rate to the value of your estate above the nil-rate band threshold:
The estate includes: property, money, investments, possessions, and certain gifts made within 7 years of death. Debts and funeral expenses are deducted before calculating IHT.
Using Our IHT Calculator
Our Inheritance Tax Calculator helps you estimate potential IHT liability:
- Enter Estate Value: Total value of all assets
- Add Property Value: Including main residence and any second homes
- Include Gifts: Gifts made within 7 years of death
- Check Allowances: Nil-rate band and residence band
- Apply Reliefs: Business, agricultural, and other available reliefs
- Calculate: See potential IHT liability
Example Calculation
Scenario: Estate worth £500,000, main home to children.
- Estate Value: £500,000
- Nil-Rate Band: -£325,000
- Residence Band: -£175,000
- Chargeable Amount: £0
- IHT Payable: £0
Using both allowances, the estate pays no IHT. Without the residence band, IHT would be £70,000 (£175,000 × 40%).
Nil-Rate Band & Thresholds (2024-25)
The nil-rate band is the amount you can pass on tax-free. It has been frozen until 2028:
| Allowance | Amount | Notes |
|---|---|---|
| Standard Nil-Rate Band | £325,000 | Per person, frozen until 2028 |
| Residence Nil-Rate Band | Up to £175,000 | For main home left to direct descendants |
| Total Potential Allowance | Up to £500,000 | £325,000 + £175,000 |
| Married Couple Total | Up to £1,000,000 | Both allowances transferable |
Transferrable Allowances
If your spouse died before you and did not use their full nil-rate band, you can transfer any unused portion to your own estate. This effectively doubles the allowance for married couples to up to £1,000,000 total.
Exemptions & Reliefs
Several reliefs can reduce or eliminate your IHT liability:
| Category | Relief |
|---|---|
| Spouse Exemption | Unlimited transfers to UK-domiciled spouse |
| Annual Exemption | £3,000 gifts per year |
| Small Gifts | Up to £250 per person per year |
| Wedding Gifts | £5,000 to child, £2,500 to grandchild |
| Charity Exemption | Gifts to qualifying charities exempt |
| Business Relief | Up to 100% on qualifying business assets |
| Agricultural Relief | Up to 100% on qualifying farmland |
Residence Nil-Rate Band (RNRB)
Additional allowance when leaving your main home to direct descendants:
- £175,000 per person for 2024-25
- Available to children, grandchildren, step-children, adopted children
- Tapered for estates over £2 million
- Lost completely for estates over £2.35 million (£2.7 million with full RNRB)
RNRB Eligibility
To qualify for the Residence Nil-Rate Band, the home must be your main residence for some period before your death. The beneficiary must be a direct descendant (child, grandchild, etc.). If the home is sold before death, relief may be restricted or lost.
Business Property Relief
Business assets can qualify for significant IHT relief:
- 100% Relief: Available for certain business assets owned for 2+ years
- 50% Relief: Available for other qualifying business assets
- Qualifying Assets: Shares in unquoted companies, business premises, goodwill, equipment
Qualification Criteria
To qualify for Business Relief, you must:
- Own the business for at least 2 years before death
- Have been actively involved in the business
- Meet ownership percentage requirements (at least 10% for some reliefs)
- Hold assets that qualify as business property
Agricultural Property Relief
Agricultural assets can qualify for 100% IHT relief:
- Farmhouses: Buildings used for farming purposes
- Agricultural Land: Pasture, arable land, woodland
- Working Farm Assets: Livestock, machinery, crops
Qualification Requirements
For Agricultural Relief, the agricultural property must:
- Be used for agricultural purposes for 2+ years before death
- Meet occupation requirements (farmer must have worked the land)
- Qualify as agricultural property under IHT rules
The "7-Year" Gift Clock (and the Reservation Trap)
A common strategy is to give away assets 7 years before death to avoid IHT. However, beware of the Gift with Reservation of Benefit (GROB) rule.
If you give your house to your children but continue to live in it rent-free, HMRC still considers the house part of your estate for IHT. To avoid this trap, you must pay market-rate rent to your children for the duration of your stay. Otherwise, the "7-year clock" never even starts ticking.
The 36% "Charity Discount"
If you have a large estate, you might be able to lower your tax rate. If you leave at least 10% of your net estate to a registered charity, the IHT rate on the rest of your taxable estate drops from 40% to 36%.
For some families, this results in the same amount of money going to the heirs, with the "extra" coming directly from the tax bill and going to a cause you care about. It is one of the few ways to legally slash the headline tax rate.
Pensions: The Tax-Free Super-Trust
One of the best kept secrets in IHT planning is that most modern pensions sit "outside" your estate. This means they are generally not subject to the 40% Inheritance Tax, regardless of their value.
The Strategy: If you have other assets (like ISAs or savings), spend those first in retirement and leave your pension untouched. This allows you to pass the pension pot to your children completely IHT-free. (Note: Income tax may still apply depending on the age of death).
The "Downsizing Addition" Relief
Many people worry that if they sell the large family home and move to a smaller apartment, they will lose the £175,000 Residence Nil-Rate Band. This is not true.
Thanks to "Downsizing Addition" rules, you can still claim the full allowance if you sold your main home on or after 8 July 2015 and replaced it with a cheaper one, or even if you didn't buy a new one at all (provided you keep assets of equivalent value for your heirs). Keep your house sale records forever!
IHT Planning Strategies
Smart planning can significantly reduce your IHT liability:
Giving Away Assets
- 7-Year Rule: Survive 7 years for full exemption from IHT
- Annual Exemptions: Use £3,000 annual exemption
- Small Gift Exemption: Give up to £250 per person per year
- Regular Gifting: Start gifting early to build up exempt transfers
Trust Planning
- Discretionary Trusts: Assets held outside estate, IHT due every 10 years
- Interest in Possession: Retain income while giving away assets
- Disabled Trusts: Special trusts for vulnerable beneficiaries
- Will Trusts: Flexible estate planning option
Other Strategies
- Life Insurance in Trust: Policy outside estate to pay IHT
- Pension Planning: Pass on unused pension pots tax-free
- Charitable Giving: Reduces IHT rate to 36% if 10%+ to charity
- Business Property Relief: 100% relief on qualifying business assets
Paying Inheritance Tax
IHT payment obligations are managed by the estate executor:
Payment Timeline
- Within 6 months: IHT generally due 6 months after death
- Interest Charged: Interest applies from due date until paid
- Installment Options: May be available in some circumstances
- Executor Responsibility: Executors ensure payment is made on time
Penalties and Interest
Late IHT payments attract significant charges:
| Period Late | Penalty |
|---|---|
| 6-12 months late | 10% of tax due |
| 12-18 months late | 20% of tax due |
| 18-24 months late | 30% of tax due |
| Over 24 months late | 40% of tax due + interest |
Interest is also charged on late payments at the prevailing HMRC rate.
Domicile Rules
Your domicile status affects your IHT liability:
UK vs Non-UK Domiciled
- UK Domiciled: Pay IHT on worldwide assets
- Non-UK Domiciled: Only pay IHT on UK-situated assets (typically UK property and UK assets)
Deemed Domiciled
You can be deemed domiciled in the UK if you have been UK resident for 15 out of the last 20 tax years. This rule applies even if you consider yourself domiciled elsewhere.
Frequently Asked Questions About Inheritance Tax
The standard nil-rate band is £325,000 per person, frozen until 2028. Married couples can transfer unused allowances between them, potentially giving up to £1,000,000 total tax-free. Additional Residence Nil-Rate Band of up to £175,000 is available for main homes left to direct descendants.
The standard IHT rate is 40% on the value of your estate above the nil-rate band. For example, on a £500,000 estate with a £325,000 nil-rate band, you would pay 40% tax on £175,000, resulting in £70,000 IHT. No tax is payable on amounts within the nil-rate band.
No, transfers between spouses or civil partners are completely exempt from IHT. This is one of the most valuable reliefs available, as it allows married couples to pass assets between each other tax-free. Unused nil-rate bands can also be transferred from a deceased spouse to the surviving spouse.
Gifts made more than 7 years before death are completely exempt from IHT. Gifts made between 3 and 7 years before death are subject to taper relief, meaning they are taxed at a reduced rate. Gifts made within 3 years of death are fully taxable at 40%. This system is known as Potentially Exempt Transfers (PETs).
Yes, through gift planning. Gifts made more than 7 years before death are exempt from IHT. You can use the annual £3,000 exemption and the small gift exemption (£250 per person) to make regular gifts. Starting gifting early maximizes the use of the 7-year rule.
The Residence Nil-Rate Band provides an additional £175,000 tax-free allowance when leaving your main home to direct descendants (children, grandchildren, step-children, adopted children). To qualify, the home must be your main residence for some period before death. The allowance is tapered for estates over £2 million and lost completely for estates over £2.35 million.
Children pay IHT on the estate value above allowances, not on what they receive. IHT is an estate tax, meaning it is deducted before beneficiaries receive anything. The executor pays IHT to HMRC before distributing assets to beneficiaries. What beneficiaries receive is their share of the net estate after IHT, debts, and expenses.
Usually not if nominated to beneficiaries before age 75. The pension fund passes directly to beneficiaries tax-free. However, if you die before age 75 or have not nominated beneficiaries, the pension may form part of your estate and be subject to IHT. Different rules apply to different types of pensions.
Taper relief reduces IHT on gifts made 3-7 years before death on a sliding scale. Gifts 3-4 years before death are taxed at 32% of their value, gifts 4-5 years before death are taxed at 24%, gifts 5-6 years before death at 16%, and gifts 6-7 years before death at 8%. After 7 years, gifts are completely exempt.
Yes, unless written in trust. If your life insurance policy is written in trust for your beneficiaries, it falls outside your estate and is not subject to IHT. If not written in trust, the payout becomes part of your estate and is subject to IHT. This is a significant estate planning consideration.
Yes, charitable gifts are completely exempt from IHT. Additionally, if you leave 10% or more of your net estate to charity, the IHT rate on the entire estate is reduced from 40% to 36%. This reduced rate incentive encourages charitable giving while maintaining overall tax revenue.
Business Relief provides up to 100% IHT relief on qualifying business assets. To qualify, you must own the business for at least 2 years before death and be actively involved in running the business. Qualifying assets include shares in unquoted companies, business premises, goodwill, and certain other business-related assets. This is one of the most valuable reliefs available for IHT planning.
IHT is generally due within 6 months of death. The executor should file the IHT return and pay any tax due by this deadline. Interest is charged on late payments. Executors can arrange instalment payments in some circumstances, but must seek approval from HMRC.
Yes, spouses can transfer unused nil-rate bands, doubling the allowance for married couples. If your spouse died before you and did not use their full nil-rate band, you can transfer any unused portion to your own estate. The transferred amount is added to your own nil-rate band, potentially giving you up to £1,000,000 total allowance.
It depends on your domicile status. UK domiciled individuals pay IHT on their worldwide assets, including overseas property. Non-UK domiciled individuals generally only pay IHT on UK-situated assets (typically UK property and UK assets). Becoming non-UK domiciled can significantly reduce IHT liability for those with overseas assets but is complex and requires careful planning.
Trusted Resources for Inheritance Tax Information
For official information about Inheritance Tax in the UK:
- GOV.UK - Inheritance Tax - Official HMRC guidance
- HMRC - IHT Rates and Allowances - Current rates and thresholds
- HMRC - Reporting and Paying IHT - How to file returns and pay
- HMRC - IHT Penalties - Late payment penalties
Created by: CalculatorZone Financial Team
Content Reviewed: February 2025
Last Updated: February 21, 2026
Methodology: This calculator uses Inheritance Tax rates and allowances published by HMRC for the 2024-25 tax year. The nil-rate band is frozen until 2028. Residence Nil-Rate Band is £175,000 for 2024-25.
This calculator provides estimates for educational purposes only. IHT planning is complex and individual circumstances vary. Always verify current rates and rules with HMRC or a qualified tax advisor before making financial decisions.
Inheritance Tax Around the World
Inheritance tax systems vary significantly between countries. While the UK applies a flat 40% rate above the nil-rate band, many countries have tiered or family-exempt systems.
| Country | Inheritance Tax Rate | Key Threshold | Spouse Exempt? |
|---|---|---|---|
| United Kingdom | 40% above nil-rate band | £325,000 NRB + £175,000 RNRB | Yes (full spouse exemption) |
| United States | 18%–40% (federal estate tax) | $13.61M exemption (2024) | Yes (unlimited marital deduction) |
| Canada | No inheritance tax | Capital gains on deemed disposition | Rollover to spouse available |
| Australia | No inheritance tax | Capital gains tax may apply | No IHT; CGT rules apply |
| India | No inheritance tax | Abolished in 1985 | N/A |
The UK's inheritance tax is often considered relatively high compared to peer nations. The nil-rate band has been frozen at £325,000 since 2009 and the residence nil-rate band was introduced in 2017 to provide additional relief for family homes passed to direct descendants.
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