Inheritance Tax Calculator UK 2026/27

How It Works

Inheritance tax (IHT) is charged at 40% on the value of an estate above the available tax-free thresholds when someone dies. The estate is everything the person owned — property, savings, investments, cars, jewellery and other possessions — minus debts and funeral expenses. The formula is inheritance tax = (estate value − available allowances) × 40%, and if the estate is worth less than the allowances, no tax is due at all.

The main allowance is the nil-rate band of £325,000 per person, frozen at that level since 2009/10 and unchanged for 2026/27 — which means rising house prices have quietly pulled more estates into tax over the years. On top of it sits the residence nil-rate band of up to £175,000, which applies when a qualifying home passes to direct descendants — children, stepchildren, adopted children, foster children or grandchildren. Together the two bands give a single person a tax-free amount of up to £500,000 when a home goes to their children.

Married couples and civil partners can effectively double the allowances. Everything left to a spouse or civil partner is exempt from inheritance tax, and any unused nil-rate band and residence nil-rate band transfer to the surviving spouse. So if the first spouse leaves everything to the survivor, the survivor’s estate can use two nil-rate bands (£650,000) and two residence bands (£350,000) — a combined tax-free amount of up to £1,000,000 when the home goes to their children. This calculator models that with the second-death option.

Two adjustments can shrink the residence band. First, it is capped at the value of the home (or the share of it) left to direct descendants. Second, it tapers away for large estates: for every £2 by which the estate exceeds £2,000,000, the residence band falls by £1. A single person’s £175,000 band is therefore reduced to £125,000 on a £2.1 million estate, and disappears entirely once the estate reaches £2.35 million. The nil-rate band itself is never tapered. This calculator applies the taper to the total residence band available, including any transferred band.

There is also a reduced rate: if at least 10% of the net estate is left to charity, the rate on the rest falls from 40% to 36%. Inheritance tax is normally due by the end of the sixth month after the month of death, and is usually paid out of the estate first.

The 7-year rule for gifts. Most lifetime gifts to individuals are Potentially Exempt Transfers: if you survive seven years after making the gift, it falls outside your estate entirely. If you die within seven years, the gift is added back — it uses up your £325,000 nil-rate band first, and tax on any part above the band is reduced by taper relief: 40% if death is within 3 years, 32% at 3–4 years, 24% at 4–5 years, 16% at 5–6 years and 8% at 6–7 years. Taper relief reduces the tax on the gift, not the value of the gift, and it only helps when total gifts in the seven years before death exceed the nil-rate band. This calculator does not model gifts, so if significant gifts were made in the last seven years, the real bill could be higher.

Worked example (single person): an £800,000 estate, with the home left to children. The allowances are the £325,000 nil-rate band plus the £175,000 residence band, giving £500,000 tax-free. The taxable estate is £300,000, and the inheritance tax is 40% × £300,000 = £120,000, leaving £680,000 for the beneficiaries.

Worked example (married couple, second death): a £1,200,000 estate, with the home left to children and both spouses’ allowances available. The allowances are £650,000 of nil-rate band plus £350,000 of residence band, giving £1,000,000 tax-free. The taxable estate is £200,000, and the inheritance tax is 40% × £200,000 = £80,000.

Worked example (the taper): a £2,400,000 estate for a single person, with the home left to children. The estate exceeds £2,000,000 by £400,000, so the residence band falls by £400,000 ÷ 2 = £200,000 — more than the £175,000 band itself, so it disappears entirely. Only the £325,000 nil-rate band remains, the taxable estate is £2,075,000, and the inheritance tax is 40% × £2,075,000 = £830,000.

Assumptions

• Estate value is net of debts. The figure you enter should already deduct mortgages, loans, credit card balances and funeral costs from the value of everything owned.
• Full transfer assumed. The second-death option assumes the first spouse left everything to the survivor, so both nil-rate bands and both residence bands transfer in full.
• Residence band capped by the taper only. The calculator applies the £2 million taper, but assumes the home is worth at least the full residence band. If the home is worth less, the real band is smaller.
• Not included: lifetime gifts and taper relief, business property relief, agricultural property relief, trusts and deeds of variation.

Sources: GOV.UK — Inheritance Tax; GOV.UK — Inheritance Tax: rules on giving gifts. Figures checked 13 November 2026.

How to Use This Calculator

Enter the total value of the estate, after deducting debts and funeral costs. For most people the two big items are the home and any savings and investments — use a realistic current value for the home rather than the price it was bought for, since inheritance tax is charged on the value at death. Then tick the options that apply: the home passes to direct descendants (children or grandchildren, including step, adopted and foster children), this is a surviving spouse’s estate with transferred allowances, and at least 10% of the net estate goes to charity.

The results show the tax-free allowances available, the taxable estate, the rate applied and the inheritance tax due, plus the amount left for the beneficiaries and the effective rate on the whole estate. Results update as you type, so you can test scenarios quickly — for example, compare the bill with and without the home going to the children, or see how much the spouse transfer saves.

Tips and Practical Advice

Write a will — and keep it up to date. Without one, the estate is divided by the intestacy rules, which may not leave the home to direct descendants in the way the residence band requires, and the £175,000 band can be lost entirely.

Use the spouse exemption deliberately. Leaving everything to a spouse on the first death is tax-free and preserves both nil-rate bands for the second death, giving a couple up to £1,000,000 tax-free. But for very large estates, using the first spouse’s band on the first death can sometimes save tax overall, so large estates should take professional advice.

Think about gifts early. The 7-year rule rewards early giving: a gift made more than seven years before death falls outside the estate completely. There is also a £3,000 annual exemption for gifts each tax year, which can be carried forward one year if unused. Gifts with strings attached — such as giving away a home and continuing to live in it — do not work, because the gift is treated as still part of the estate.

Check the taper if the estate is near £2 million, and remember the deadline. The residence band starts to fall as soon as the estate passes £2 million, and it is gone by £2.35 million for a single person. Inheritance tax is due by the end of the sixth month after the month of death, and interest is charged on late payment; for estates where most of the value is in property, the tax on the property can be paid in instalments over up to ten years.

Frequently Asked Questions