Inheritance Tax Calculator

IHT is charged at 40% on the value of your estate above the tax-free allowances. Every person has a nil-rate band of £325,000 and potentially a residence nil-rate band of up to £175,000 if leaving their home to direct descendants. A married couple can combine these allowances up to £1 million.

The 2026/27 threshold is £325,000 single (£650,000 for a married couple) plus up to £175,000 residence nil-rate band per person if you leave your home to children. That gives £500,000 single or £1 million combined tax-free before IHT at 40% applies. The £325k band is frozen until at least 2027-28.

Leaving your main home to children or grandchildren qualifies for the residence nil-rate band — up to £175,000 per person on top of the £325,000 nil-rate band. For a single parent that is £500,000 total; for a married couple transferring unused allowance, up to £1 million. The residence band tapers by £1 for every £2 where the estate exceeds £2 million.

The main residence relief is the residence nil-rate band applied in this calculator: £175,000 per person (doubled to £350,000 for a couple) reduces your taxable estate if your home passes to direct descendants. Estates over £2 million lose £1 of residence band per £2 over the threshold — fully gone at £2.35 million (single) or £2.7 million (couple). Toggle 'Home passed to children' to see it.

Your estate includes property, savings, investments, vehicles, personal possessions, and certain gifts made in the 7 years before death. Life insurance payouts made directly to your estate also count. However, pensions passed to beneficiaries and assets held in trust may fall outside the estate.

The £325,000 nil-rate band has been frozen since 2009 and is currently frozen until at least 2027-28. The residence nil-rate band rises with CPI inflation. Successive freezes mean more estates are caught by IHT each year as property prices increase.

Gifts made more than 7 years before death are exempt. Gifts within 7 years are added back to the estate with taper relief reducing the tax rate after 3 years. You can give away £3,000 per year tax-free (annual exemption) plus regular gifts from surplus income.

Key strategies include: gifting early (the 7-year rule), using the annual exemption every year, writing life insurance into trust, leaving at least 10% to charity (reduces rate to 36%), and ensuring your pension is structured to pass outside your estate.