UK Inheritance Tax Calculator

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2026/27 IHT Thresholds and Rates

The Nil-Rate Band sits at £325,000 and the Residence Nil-Rate Band adds another £175,000 where the main home goes to children or grandchildren, per HMRC guidance published on gov.uk.

Allowance	Per Person	Couple (Transferable)	Conditions
Nil-Rate Band (NRB)	£325,000	£650,000	Available to all estates
Residence Nil-Rate Band (RNRB)	£175,000	£350,000	Home left to direct descendants
Combined maximum	£500,000	£1,000,000	NRB + RNRB

Everything above the available threshold is taxed at 40%. If 10% or more of the net estate is left to charity, the rate drops to 36%.

The NRB has been frozen at £325,000 since April 2009. The Autumn Budget 2024 extended the freeze on both the NRB and RNRB to 5 April 2030, and the 2025 Autumn Budget pushed the freeze out one further year to April 2031. With house prices and share values rising, this continuing freeze is the main reason IHT receipts keep growing - estates paid £6.70bn of IHT in 2022/23 per HMRC's July 2025 liabilities statistics, and the Office for Budget Responsibility forecasts £8.7bn for 2025/26.

How Many UK Estates Actually Pay IHT?

Only around 4.62% of UK deaths resulted in any Inheritance Tax in 2022/23, meaning roughly 95% of estates pay nothing at all, according to HMRC's latest liabilities statistics. The average bill across the roughly 31,500 estates that do pay is about £212,000, but the distribution is heavily skewed by large estates.

Estate Value	Estates Paying IHT	Average IHT Bill
£1m - £1.5m	~6,330	£161,000
£1.5m - £2m	~2,300	£337,000
Over £10m	~200	£4.01m

The 40% headline rate gets most of the attention, but the effective rate is always lower because the first £500,000 (or £1m for a couple) is tax-free. An £800,000 single-person estate with the full RNRB pays 40% on £300,000 = £120,000, an effective rate of 15%.

How IHT Is Calculated

Worked example (single person, £600,000 estate, home left to children):

• NRB: £325,000
• RNRB: £175,000 (home going to children)
• Total threshold: £500,000
• Taxable: £600,000 - £500,000 = £100,000
• IHT: £100,000 x 40% = £40,000

Worked example (married couple, £1,200,000 estate, home to children):

• Combined NRB: £650,000
• Combined RNRB: £350,000
• Total threshold: £1,000,000
• Taxable: £1,200,000 - £1,000,000 = £200,000
• IHT: £200,000 x 40% = £80,000

The RNRB Taper

Estates worth over £2,000,000 lose RNRB at a rate of £1 for every £2 above the threshold:

Estate Value	RNRB (Single)	RNRB (Couple)
Under £2,000,000	£175,000	£350,000
£2,100,000	£125,000	£300,000
£2,200,000	£75,000	£250,000
£2,350,000	£0	£175,000
£2,700,000	£0	£0

Spouse Exemption

Transfers between married couples and civil partners are completely exempt from IHT, regardless of amount. When the first spouse dies, any unused NRB and RNRB passes to the surviving spouse. This is why a married couple can have up to £1,000,000 of combined allowances even if the first spouse left everything to the survivor.

The 7-Year Gift Rule

Gifts made during your lifetime become IHT-free if you survive 7 years. Gifts within 7 years of death may use taper relief:

Years Before Death	Tax Rate on Gift (if above NRB)
0 - 3 years	40%
3 - 4 years	32%
4 - 5 years	24%
5 - 6 years	16%
6 - 7 years	8%
7+ years	0% (exempt)

Annual exemptions also apply: £3,000/year in small gifts (carry forward one year if unused), £250/person in small gifts, and unlimited gifts from normal income.

Common IHT Planning Strategies

• Use annual exemptions: £3,000/year plus £250 per recipient is straightforward and documented
• Gifts from surplus income: Regular gifts from income (not capital) that do not affect your standard of living are immediately exempt
• Pensions (until April 2027): Pension pots currently sit outside the estate for IHT. Most unused pensions will be brought into IHT from 6 April 2027 - see the section below.
• Life insurance in trust: A life insurance policy written in trust pays out to beneficiaries without being part of the estate
• Charitable giving: Leaving 10%+ to charity reduces the IHT rate from 40% to 36%
• Business Relief: Qualifying business assets can receive 50-100% relief from IHT

What Changes in April 2027 for Pensions?

From 6 April 2027, most unused pension funds and pension death benefits will be brought within the estate for IHT purposes, following the Autumn Budget 2024 announcement. Pensions have historically sat outside the estate, making them the single most common IHT planning tool. HMRC estimates the change will pull roughly 10,500 extra estates into IHT that would not otherwise have paid, and another 38,500 estates will pay more - with the average liability rising by around £34,000.

Death-in-service benefits from registered pension schemes and dependant's scheme pensions from defined benefit or collective money purchase arrangements are excluded. Pensions passing to a spouse or civil partner remain fully exempt under the spouse exemption. After April 2027, personal representatives (not pension administrators) will be responsible for calculating and paying any IHT on pensions.

If a significant portion of your wealth sits in a SIPP or workplace DC pension, the planning playbook will need rethinking before April 2027. Speaking to a chartered financial planner is worthwhile for estates that may cross the £1m combined threshold once pensions are counted.

Annual Gift Exemptions at a Glance

Several exemptions let you move money out of an estate during your lifetime without waiting the full seven years. These sit on top of any Potentially Exempt Transfers (PETs) and are often under-used.

Exemption	Annual Limit	Notes
Annual exemption	£3,000	Carry forward one year if unused (max £6,000)
Small gifts	£250 per recipient	Unlimited recipients; cannot combine with annual exemption to the same person
Wedding or civil partnership gifts	£5,000 / £2,500 / £1,000	£5k to a child, £2.5k to grandchild, £1k to anyone else
Gifts from surplus income	Unlimited	Must be regular, from income (not capital), and not reduce standard of living
Gifts to UK charities	Unlimited	Also reduces IHT rate to 36% if >=10% of net estate
Gifts to spouse/civil partner	Unlimited	Fully exempt (subject to a £325k cap if recipient is non-UK domiciled)

Business Relief and Agricultural Relief from April 2026

Business Relief (BR) and Agricultural Property Relief (APR) have historically given 100% relief on qualifying business and farming assets held for at least two years. Following the Autumn Budget 2024 and a December 2025 partial U-turn, from 6 April 2026 the 100% rate is capped at a combined £2.5 million allowance per estate, and this allowance is transferable between spouses and civil partners. Value above the allowance receives 50% relief, giving an effective IHT rate of 20%.

A married couple can therefore pass on up to £5 million of qualifying business or agricultural assets at 100% relief, plus two £325,000 nil-rate bands - totalling roughly £5.65 million tax-free. HMRC estimates around 1,100 estates will pay more tax following the change, with 185 estates claiming APR directly affected.

AIM-listed shares, which previously qualified for 100% BR, drop to 50% relief on the whole holding from April 2026 regardless of the allowance. Investors relying on AIM portfolios for IHT planning should review their allocations well before that date.

Common Mistakes That Increase an IHT Bill

• Leaving the RNRB on the table: The RNRB only applies if the residence passes to direct descendants (children, stepchildren, adopted children, grandchildren). Leaving the house to siblings, nieces, or nephews forfeits up to £175,000 of allowance per person.
• Not claiming the transferable NRB: When the second spouse dies, the personal representatives must submit form IHT402 to claim any unused NRB from the first death. It is not applied automatically and can be claimed even if the first spouse died decades ago.
• Crossing the £2m taper threshold: Because RNRB tapers £1 for every £2 above £2m, an estate that grows from £2m to £2.35m effectively pays 60% marginal IHT on that slice (40% direct + lost RNRB). Downsizing additions and charitable gifts can help stay below the cliff.
• Seven-year rule on failed PETs: Taper relief only reduces the tax on gifts above the NRB. A £400,000 gift made six years before death still uses the first £325,000 of NRB in full at the date of death - taper applies only to the £75,000 excess. This is the most commonly misunderstood part of the regime.
• Forgetting gifts from normal income: Regular gifts out of surplus income (not capital) that do not reduce your standard of living are immediately exempt, but you must keep detailed records of income, expenditure, and the pattern of gifts on form IHT403 for HMRC.

For tracking total estate value, the net worth calculator helps tally assets and liabilities. The retirement calculator supports longer-term pension and drawdown planning, and the compound interest calculator projects how quickly gifted assets can grow once outside the estate.

IHT rules are complex with many exemptions and reliefs. This calculator provides estimates only. Consult a qualified solicitor or STEP-registered financial advisor for estate planning advice. All calculations run in your browser. No data is sent to any server.

Sources

• GOV.UK - IHT nil-rate band and RNRB thresholds from 6 April 2026
• GOV.UK - Work out and apply the Residence Nil-Rate Band
• GOV.UK - Inheritance Tax: unused pension funds and death benefits (April 2027)
• House of Commons Library - Inheritance Tax: a basic guide
• Office for Budget Responsibility - Inheritance Tax forecasts
• GOV.UK - HMRC Inheritance Tax Statistics