Inheritance Tax Calculator UK
Calculate your estimated UK Inheritance Tax liability for 2026/27. Model the £325,000 Nil-Rate Band, £175,000 Residence Nil-Rate Band, £1,000,000 married couple exemption, and the 7-year gift taper relief rules.
Standard single allowance: £325,000 Nil-Rate Band, plus up to £175,000 Residence Nil-Rate Band if passing your home to direct children or grandchildren.
1. Estate Assets Valuation
Total Assets: £675,000.00Note: Unlike Income Tax/CGT, ISAs are fully subject to Inheritance Tax.
2. Liabilities & Allowable Deductions
Liabilities: £5,000.003. Statutory Reliefs & Allowances (IHTA 1984)
Gifts made within 7 years before death consume your standard £325k/£650k Nil-Rate Band first.
Calculated strictly under the Inheritance Tax Act 1984 (IHTA 1984): Nil-Rate Band (£325k under s.7), Residence Nil-Rate Band (£175k under s.8D), Transferable Spousal Band (s.8A), and Charity Exemption (s.23 & Sch 1A).
How UK Inheritance Tax Works (2026/27 Statutory Rules)
A definitive guide to nil-rate bands, spousal transfers, the £2 million taper trap, and legal gifting strategies under the Inheritance Tax Act 1984.
1. The Statutory Nil-Rate Bands (NRB & RNRB)
Inheritance Tax is a tax on the estate (the property, money, and possessions) of someone who has passed away. In the UK, you do not pay any Inheritance Tax if the value of your estate is below the statutory tax-free threshold. The standard rate of Inheritance Tax on the value above this threshold is 40%.
| Statutory Allowance | Single Person | Married / Civil Partner | Governing Statute |
|---|---|---|---|
| Standard Nil-Rate Band (NRB) | £325,000 | £650,000 | IHTA 1984 s.7 |
| Residence Nil-Rate Band (RNRB) | £175,000 | £350,000 | IHTA 1984 s.8D |
| Maximum Tax-Free Threshold | £500,000 | £1,000,000 | Combined Threshold |
- You must own a qualifying residential property that you have lived in as your home.
- The home must be inherited by direct descendants: children, grandchildren, step-children, adopted children, or foster children. Passing the home to siblings, nieces, or nephews does not qualify.
- The RNRB is capped at the actual market value of your interest in the home if it is worth less than £175,000 (£350,000 for couples).
2. Spousal Exemption & Transferable Allowances (s.8A)
In the UK, assets passed to a legal spouse or civil partner domiciled in the UK are 100% exempt from Inheritance Tax under Section 18 of the Inheritance Tax Act 1984. There is no limit on the amount of wealth that can be passed between married partners tax-free during life or at death.
Furthermore, under Section 8A, whatever percentage of the Nil-Rate Band and Residence Nil-Rate Band went unused on the first spouse's death is carried forward and transferred to the surviving spouse. For instance, if the first spouse left everything to the survivor, 100% of their allowances remain intact. When the surviving partner eventually passes away, their estate benefits from two full Nil-Rate Bands (£325,000 × 2 = £650,000) and two full Residence Nil-Rate Bands (£175,000 × 2 = £350,000), allowing up to £1,000,000 to be distributed to family completely tax-free.
3. The 7-Year Gift Rule: Potentially Exempt Transfers (PETs)
When you make an outright gift of money or assets to an individual during your lifetime, HMRC classifies it as a Potentially Exempt Transfer (PET) under Section 3A of the Inheritance Tax Act 1984. If you survive for 7 full years from the date of the transfer, the gift becomes completely exempt and falls outside your estate for IHT.
If the donor dies within 7 years of making the gift, the transfer fails and is brought back into account. Lifetime gifts consume the donor's £325,000 Nil-Rate Band first, in chronological order. If the gifts exceed £325,000, the excess is subject to tax, but Taper Relief reduces the tax bill according to how many years elapsed before death:
| Time Between Gift & Death | Taper Relief % | Effective IHT Rate | Tax on £100,000 Excess Gift |
|---|---|---|---|
| 0 to 3 years | 0% (No Relief) | 40% | £40,000 |
| 3 to 4 years | 20% Relief | 32% | £32,000 |
| 4 to 5 years | 40% Relief | 24% | £24,000 |
| 5 to 6 years | 60% Relief | 16% | £16,000 |
| 6 to 7 years | 80% Relief | 8% | £8,000 |
| 7 or more years | 100% Relief | 0% (Exempt) | £0 |
Under Section 199 of the Inheritance Tax Act 1984, the legal liability to pay tax on a failed lifetime gift falls squarely on the recipient of the gift, not the executor of the estate. If a parent gifts £500,000 to an adult child and passes away 2 years later, the child must pay £70,000 in IHT unless the will contains explicit instructions for the estate to bear the cost.
4. The £2,000,000 Residence Nil-Rate Band Taper Trap
Under Section 8D of the Inheritance Tax Act 1984, the government introduces an effective wealth ceiling for the Residence Nil-Rate Band. If the net value of an estate (before deducting exemptions or reliefs) exceeds £2,000,000, the available RNRB is tapered down:
- The RNRB is reduced by £1 for every £2 that the net estate exceeds £2,000,000.
- For a single person with a £175,000 RNRB, the allowance is reduced to £0 once the estate reaches £2,350,000.
- For a surviving spouse with a transferred £350,000 RNRB, the allowance is completely wiped out once the estate reaches £2,700,000.
- This creates an effective marginal tax rate of 60% on estate wealth between £2,000,000 and £2,350,000/£2,700,000.
5. Five Legal Ways to Mitigate UK Inheritance Tax
Pensions Held in Trust
Defined contribution pensions generally do not form part of your estate for IHT. Leaving your pension fund untouched and living on non-pension capital allows wealth to cascade down generations outside the tax net.
Normal Expenditure Out of Income (s.21)
Under Section 21 IHTA 1984, gifts made out of regular surplus income (rather than capital) that do not impact your standard of living are immediately 100% exempt from IHT with no 7-year waiting period.
Whole of Life Insurance Written in Trust
A Whole of Life policy written under an appropriate irrevocable trust pays out a guaranteed lump sum directly to beneficiaries outside the estate, providing instant cash to settle the IHT bill without selling family assets.
Charitable Legacies & 36% Rate (Sch 1A)
Donations to registered UK charities are 100% tax-exempt. Donating at least 10% of your net baseline estate reduces the IHT rate on the remainder of your taxable estate from 40% down to 36%.
6. Worked Comparison Examples (2026/27)
- Gross Estate: £650,000
- Liabilities: £10,000 (Net £640,000)
- Standard NRB: £325,000
- Residence NRB: £175,000
- Tax-Free Allowance: £500,000
- Taxable Estate: £140,000
- Gross Estate: £950,000
- Liabilities: £5,000 (Net £945,000)
- Combined NRB: £650,000
- Combined RNRB: £350,000
- Total Allowance: £1,000,000
- Taxable Estate: £0
- Gross Estate: £2,400,000
- Liabilities: £50,000 (Net £2.35m)
- Single NRB: £325,000
- RNRB: £0 (Tapered away)
- Total Allowance: £325,000
- Taxable Estate: £2,025,000
Frequently Asked Questions
Clear answers based on official HMRC rules and statutory guidance.
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An illustration of estate or gift tax
Enter the ownership, gifts and exemptions that the tool supports. A simple estate total cannot establish all liabilities of a real estate.
The seven-year rule generally concerns potentially exempt transfers; gifts with reservation and trusts differ. Taper relief reduces tax on a chargeable gift, not the gift value. Residence and spouse rules require care.
Check the rules for your circumstances
Official guidance supports the rules described here; it does not approve or certify this calculator. Confirm dates, eligibility and unsupported cases before making a financial decision.