What is the inheritance tax nil-rate band?

The nil-rate band is the amount of your estate that can be passed on without paying inheritance tax. For 2026/27, it is £325,000 per person. Anything above this is taxed at 40%, unless other reliefs apply.

What is the residence nil-rate band?

The residence nil-rate band (RNRB) is an additional allowance of £175,000 per person if you leave your main home to direct descendants (children, grandchildren). Combined with the standard nil-rate band, a single person can pass on £500,000 tax-free, and a married couple up to £1 million.

Can married couples transfer their nil-rate band?

Yes. Any unused portion of the nil-rate band and residence nil-rate band can be transferred to a surviving spouse or civil partner. This means a married couple can potentially pass on up to £1 million tax-free when both allowances are combined and transferred.

UK Inheritance Tax Calculator 2026/27

Estimate the inheritance tax on your estate. Includes nil-rate band (£325,000), residence nil-rate band (£175,000), married couples transfer, and lifetime gift taper relief.

🏠 Your Estate

Main Residence Value

The value of your main home if left to direct descendants.

Other Assets (Cash, Investments, etc)

Outstanding Debts & Liabilities

Mortgages, loans, credit cards, funeral expenses.

Lifetime Gifts (within 7 years)

Gifts above the annual exemption (£3,000/year) made within 7 years of death.

🛡️ Reliefs & Allowances

Married or in Civil Partnership?

Spouse's Unused Allowance (£)

If your spouse died first and left everything to you, their full £325k nil-rate band + £175k residence band transfers.

Home Left to Direct Descendants?

Required to claim the £175,000 residence nil-rate band.

Years Since Largest Gift

Taper relief reduces IHT on lifetime gifts from year 3 onwards.

📊 Your IHT Estimate

Estimated Inheritance Tax

£0

Tax rate on estate above allowances

💰 Estate Breakdown

✅ Tax-Free Allowances Used

£0

⚠️ Taxable Estate

£0

Assumptions

Calculation uses 2026/27 nil-rate bands: £325,000 standard + £175,000 residence. Married couples can transfer unused allowances. Lifetime gifts within 7 years may be subject to taper relief (20%-80% reduction). Gifts to spouses are exempt. IHT rate is 40% on the taxable estate (or 36% if 10%+ left to charity).

How Inheritance Tax Works in the UK

Inheritance Tax (IHT) is a 40% tax on the value of your estate above your available allowances when you die. The good news: most estates pay no IHT because allowances cover a significant portion.

Standard Nil-Rate Band: £325,000

Everyone gets a £325,000 allowance. Anything below this passes tax-free.

Residence Nil-Rate Band: £175,000

An extra £175,000 if you leave your main home to direct descendants (children, grandchildren, step-children). Combined, a single person can pass on £500,000 tax-free.

Married Couples: Up to £1 Million

Any unused nil-rate band and residence band transfers to your surviving spouse. If spouse A dies and leaves everything to spouse B (which is IHT-exempt), spouse B can use both allowances when they die — potentially £1 million tax-free.

Lifetime Gifts and Taper Relief

Gifts made within 7 years of death may still be taxed, but taper relief reduces the rate:

Years Before Death	Taper Relief	Effective IHT Rate
0–3 years	0%	40%
3–4 years	20%	32%
4–5 years	40%	24%
5–6 years	60%	16%
6–7 years	80%	8%
Over 7 years	100%	0%

Exemptions That Reduce IHT

Spouse exemption: Gifts to UK-domiciled spouses are IHT-free
Annual exemption: £3,000 per year (£6,000 if unused from previous year)
Small gifts: Up to £250 per person, unlimited recipients
Wedding gifts: £1,000-£5,000 depending on relationship
Normal expenditure: Regular gifts from surplus income
Charity: Gifts to registered charities are IHT-free

Reduced IHT Rate for Charitable Giving

If you leave 10% or more of your net estate to charity, the IHT rate on the remaining taxable estate drops from 40% to 36%. This can mean more money for both your beneficiaries and your chosen charities.

Frequently Asked Questions

How can I reduce inheritance tax?

The most effective strategies are: (1) making regular gifts from surplus income, (2) using your £3,000 annual exemption every year, (3) putting assets into trust (with professional advice), (4) leaving 10%+ to charity for the 36% rate, (5) using pension drawdown (pensions are usually outside your estate), and (6) equity release or lifetime gifts of your home with a reservation of benefit avoided.

Do I pay IHT if I leave everything to my spouse?

No — transfers between UK-domiciled spouses and civil partners are completely exempt from IHT, regardless of the amount. The surviving partner also inherits any unused nil-rate band and residence nil-rate band, potentially allowing up to £1 million to pass tax-free to the next generation.

Are pensions included in my estate for IHT?

Usually no. Defined contribution pensions are typically held in trust and fall outside your estate for IHT purposes. This makes pensions one of the most tax-efficient ways to pass wealth to descendants. However, if you die after age 75, beneficiaries pay Income Tax at their marginal rate on withdrawals.

What is a Potentially Exempt Transfer (PET)?

A PET is a gift made during your lifetime that becomes completely exempt from IHT if you survive for 7 years. If you die within 7 years, taper relief may reduce the tax. PETs are the most common IHT planning tool alongside regular gifts from surplus income.