Inheritance Tax Calculator

Calculate UK Inheritance Tax (IHT) liability based on estate value and thresholds.

Leaving 10% or more reduces tax rate to 36%.

Inheritance Tax Breakdown

Inheritance Tax Bill
£0.00
Taxable Estate
£0.00
Effective Tax-Free Threshold
£500,000.00
Net Estate
Tax

About the UK Inheritance Tax Calculator

Inheritance tax is charged at 40%, but almost nobody pays 40% of their estate. What actually happens is that a set of thresholds is deducted first, and only the excess is taxed. Get the thresholds wrong and your estimate can be out by hundreds of thousands of pounds. The basic nil-rate band is £325,000. If your home passes to your children or grandchildren, a residence nil-rate band of a further £175,000 applies, taking the threshold to £500,000. That second band is the one people miss, and it is also the one with the trap: it is withdrawn at £1 for every £2 of estate value above £2 million, so a large estate loses it entirely and pays 40% on far more than the owner expected. This calculator applies both bands, the taper above £2 million, and the reduced 36% rate that applies when at least a tenth of the estate goes to charity. It gives an estimate for a single person is estate. The rules for married couples and civil partners are more generous still, because unused bands transfer to the survivor — a point the FAQs cover, and the reason many couples effectively have a £1 million threshold between them.

Mathematical Formula & Logic

The calculation runs in three stages. First, work out the threshold. Everyone has a nil-rate band of £325,000. If a residence is left to direct descendants — children, stepchildren, adopted or foster children, grandchildren — a residence nil-rate band of up to £175,000 is added, capped at the value of the property itself. That gives a combined threshold of up to £500,000. Second, apply the taper. If the estate is worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 above that figure. An estate of £2.35 million therefore loses the entire £175,000 and falls back to a £325,000 threshold. The basic nil-rate band is not affected by this taper. Third, tax the excess. Whatever remains above the threshold is charged at 40%. If at least 10% of the net estate is left to charity, the rate on the remainder falls to 36% instead. Gifts made in the seven years before death are added back into the estate, with taper relief reducing the tax on gifts made between three and seven years before death rather than reducing the gift itself. Anything left to a spouse or civil partner is entirely exempt, however large, as is anything left to charity.

Step-by-Step Example

Four worked examples showing how much difference the second threshold makes. Example 1: an estate of £400,000 with no property passing to descendants. The threshold is the basic £325,000, so £75,000 is taxable. At 40% the tax is £30,000, an effective rate on the whole estate of 7.5%. Example 2: an estate of £500,000 where the home passes to children. Both bands apply, giving a threshold of £500,000 exactly. Nothing is taxable and the bill is nil. Compare that with the same estate where the home goes to a nephew instead: the threshold drops to £325,000, £175,000 becomes taxable, and the tax is £70,000. The destination of the property, not its value, produced a £70,000 swing. Example 3: an estate of £1 million with the home passing to children. The threshold is £500,000, leaving £500,000 taxable at 40%, which is £200,000. Without the residence band the taxable amount would be £675,000 and the tax £270,000 — the residence band is worth exactly £70,000 in tax, which is 40% of £175,000. Example 4: the same £1 million estate, no residence band, but with 10% left to charity. The taxable amount is still £675,000, but the rate falls from 40% to 36%. The tax becomes £243,000 rather than £270,000. Note that the charitable gift also leaves the estate, so the true comparison for the family is more favourable than these two figures alone suggest.

Reference Data & Values

labelvalue
Nil-rate band£325,000 — available to every estate
Residence nil-rate bandUp to £175,000 — only if a home passes to direct descendants
Maximum single-person threshold£500,000
Standard rate above the threshold40%
Reduced rate36% if 10% or more of the net estate goes to charity
Residence band taper£1 lost for every £2 of estate above £2 million
Residence band fully lost at£2.35 million
Left to a spouse or civil partnerExempt in full, whatever the amount

Frequently Asked Questions

£325,000 as a baseline, or up to £500,000 if your home passes to your children or grandchildren. For a married couple or civil partners the unused portion of the first person to die transfers to the survivor, so a couple can commonly pass on up to £1 million between them. Above the applicable threshold the rate is 40%, or 36% if at least a tenth of the net estate goes to charity.
It is an additional threshold of up to £175,000 that applies only when a residence is left to direct descendants — children, stepchildren, adopted or foster children, or grandchildren. Nephews, nieces, siblings and friends do not qualify, and neither does leaving the house to a discretionary trust in many cases. The band is also capped at the value of the property itself, so a £100,000 flat gives £100,000 of band rather than the full £175,000.
Because it tapers away above £2 million at £1 for every £2 of excess. At £2.35 million the whole £175,000 has gone. This produces a punishing effective marginal rate in that range: each extra £2 of estate value both attracts tax itself and removes £1 of threshold, so the effective rate on that band of value is 60% rather than 40%. It is the single strongest argument for taking advice if your estate is near £2 million.
Gifts made in the seven years before death are added back into the estate. If you survive seven years, the gift falls out entirely. Between three and seven years, taper relief reduces the tax due on the gift on a sliding scale — but it reduces the tax, not the value of the gift, which is a distinction that catches people out. Gifts within three years of death get no relief at all. There are separate annual and small-gift exemptions that sit outside this entirely.
No. Transfers between spouses and civil partners are completely exempt from inheritance tax, with no upper limit, provided both are UK domiciled. More usefully, any nil-rate band the first person does not use transfers to the survivor as a percentage. If the first to die leaves everything to their spouse and uses none of their £325,000, the survivor has £650,000 of nil-rate band plus potentially two residence bands.
If you leave at least 10% of your net estate to charity, the rate on the taxable remainder falls from 40% to 36%. The charitable gift is itself exempt, so it reduces the estate as well as the rate. The arithmetic means that at the margin, increasing a charitable gift to reach the 10% threshold can leave the family with almost the same amount while giving substantially more away — one of the few genuinely win-win provisions in the tax code.
The executors pay it out of the estate before distributing anything to beneficiaries, and it is generally due within six months of the end of the month of death. Interest runs from that point. The awkward part is that probate is often not granted until some tax has been paid, which can leave executors needing to find money before they can access the estate. Tax on property can usually be paid in instalments over ten years to ease this.
No. It estimates a straightforward single-person estate with an optional residence and an optional charitable gift. It does not model business property relief, agricultural relief, trusts, the transferable nil-rate band from a deceased spouse, or non-domiciled status. Any of those can change the answer substantially. Treat the figure here as a starting point for a conversation with a solicitor, not as a final assessment.