Inheritance Tax Calculator
Calculate UK Inheritance Tax (IHT) on estates with nil-rate bands and reliefs for 2026/27.
Important: This calculator provides estimates based on 2026/27 UK tax rules. Actual IHT liability depends on individual circumstances, reliefs, and exemptions. Consult a qualified tax adviser or solicitor for personalised advice.
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Why IHT catches more families every year
The UK's main nil-rate band (£325,000) has been frozen since 2009, while average house prices have roughly doubled over the same period. This "fiscal drag" means a growing number of ordinary homeowning families now face an Inheritance Tax bill that would once have only affected wealthy estates, simply because property values have outpaced the frozen threshold.
With careful planning, gifting, trusts, and making full use of both the nil-rate band and residence nil-rate band , many families can significantly reduce or eliminate their IHT liability, which is why forward planning matters more than ever at current threshold levels.
Legitimate ways to reduce your IHT bill
Gift early and keep records
Gifts made more than 7 years before death fall entirely outside your estate for IHT purposes. The £3,000 annual gift exemption is also immediately outside your estate, but keep clear records, as executors must document gifts for HMRC.
Use the residence nil-rate band fully
The extra £175,000 allowance only applies when your main home passes to children or grandchildren (including step- and adopted children), leaving property to others (e.g. a niece) forfeits this allowance.
Consider life insurance in trust
A life insurance policy written into trust pays out immediately to beneficiaries and sits outside your estate, providing funds to cover any IHT bill without delaying probate or forcing an asset sale.
Review pension nominations
Most defined contribution pensions sit outside your estate for IHT purposes when passed via nomination, but rules are changing from April 2027, so if your estate includes a significant pension, get updated advice.
IHT planning can be complex and rules change frequently, always speak to a qualified solicitor or financial adviser before making decisions based on tax planning alone.
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Worked example: an £800,000 estate left to children
The nil-rate band is £325,000 and the residence nil-rate band is £175,000 when the main home passes to children, giving £500,000 of allowances. The remaining £300,000 is taxed at 40%, so the bill is £120,000.
If the estate was left by a widow or widower whose late spouse used none of their allowances, unused allowances can be transferred. That could lift the combined allowance to £1,000,000 and remove the bill in this example.
Frequently Asked Questions
Are gifts counted in the estate?
Gifts made within seven years of death may be taxable, on a sliding scale after three years. Some gifts are exempt, such as those between spouses.
Who pays inheritance tax?
It is normally paid from the estate by the executors before assets are distributed.
Does the residence nil-rate band always apply?
No. It needs the home to pass to direct descendants and tapers away for larger estates, so check the current rules on GOV.UK.
Frequently Asked Questions
What is the Inheritance Tax threshold?
The UK nil-rate band is £325,000 (frozen until 2028). You can also claim the residence nil-rate band of £175,000 if passing your home to direct descendants, totaling £500,000 per person or £1,000,000 for couples.
How can I reduce Inheritance Tax?
Strategies include: giving annual gifts (£3,000/year), leaving 10%+ to charity (reduces rate to 36%), using spouse exemption (unlimited), setting up trusts, and life insurance policies written in trust.
Do I need to file an Inheritance Tax return?
Yes, if the estate exceeds the nil-rate band or certain conditions apply. Form IHT400 must be submitted within 12 months of death. No tax is due if everything is left to a spouse/civil partner or charity.
Key Terms Explained
Plain-English definitions of the financial terms used in this calculator.
- Gross vs Net Income
- Gross income is your pay before deductions; net (take-home) pay is what lands in your bank after income tax, National Insurance, pension contributions and student loan repayments.
- Personal Allowance
- The amount of income you can earn each tax year before paying income tax, £12,570 for most people in the UK. It is reduced by £1 for every £2 earned above £100,000.
- National Insurance (NI)
- A UK payroll contribution that funds the State Pension and some benefits. Employees pay Class 1 NI on earnings above the primary threshold, deducted automatically through PAYE.
- Tax Band
- The income ranges taxed at different rates. In England, Wales and NI: basic rate 20%, higher rate 40% (above £50,270) and additional rate 45% (above £125,140). Scotland uses its own bands.
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Not Financial Advice: This calculator is for informational and educational purposes only. Results are estimates and do not constitute financial advice, recommendations, or regulated advice. We are not authorised or regulated by the Financial Conduct Authority (FCA). Always consult a qualified financial adviser for personalised advice. Tax treatment depends on your individual circumstances and may change. Tax laws and rates may change. Past performance does not guarantee future results.
