📝 Complete Guide to Inheritance Tax in the UK
This inheritance tax calculator UK helps you understand your IHT liability and plan your estate effectively. Inheritance tax (IHT) is charged at 40% on estates above the £325,000 threshold. With proper planning, you can significantly reduce or eliminate this tax burden.
📊 Current IHT Rates and Thresholds (2026)
- Nil-Rate Band (NRB): £325,000 per person (tax-free)
- Residence Nil-Rate Band (RNRB): £175,000 (if leaving main home to children/grandchildren)
- Maximum allowance per couple: £1,000,000 (NRB + RNRB × 2)
- IHT Rate: 40% on taxable estate above allowances
- Reduced Rate: 36% if 10%+ left to charity
🏠 Residence Nil-Rate Band (RNRB)
Additional allowance of £175,000 for your main property. To qualify:
- Property must be your main residence
- Must be left to direct descendants (children, grandchildren)
- Tapers down for estates over £2,000,000
🎁 Gift Planning - The 7-Year Rule
Gifts made more than 7 years before death are tax-free. However:
- Annual exemption: £3,000 per tax year (use it or lose it)
- Small gifts: Up to £250 per person (tax-free)
- Wedding gifts: Up to £5,000 for children, £2,500 for grandchildren
- Gifts from income: Regular gifts from surplus income are tax-free
- Potentially Exempt Transfers (PETs): Gifts become tax-free after 7 years
💼 Spouse Exemption
You can pass unlimited assets to your spouse/civil partner tax-free. This also allows:
- Transfer unused nil-rate band to spouse
- Transfer unused residence nil-rate band to spouse
- Up to £1,000,000 combined allowance for married couples
📈 Strategies to Reduce Inheritance Tax
- Use ISA and pension allowances: Pensions are outside your estate for IHT purposes
- Make regular gifts: £3,000 annual exemption, small gifts up to £250
- Charitable donations: 10%+ reduces IHT rate from 40% to 36%
- Trusts: Discretionary trusts can protect assets for future generations
- Business Property Relief: Some business assets qualify for 100% relief
- Agricultural Property Relief: Farming land may qualify for relief
📊 UK Inheritance Tax Statistics (2026)
- Average IHT paid: £80,000 per estate
- Only 4-5% of estates pay IHT
- IHT receipts exceeded £7 billion in 2025
- 70% of taxpayers use professional advice
- Most common IHT avoidance: gifts and trusts
⚡ Key Takeaways
- Use your £325,000 nil-rate band fully
- Make regular gifts (£3,000/year tax-free)
- Consider pension and ISA for tax-free wealth transfer
- Get professional advice for complex estates
- Review your will and estate plan regularly
⚠️ Important Notes
- This calculator provides estimates based on 2026 UK tax rules
- Always consult a tax professional for your specific situation
- IHT rules can change, check the latest HMRC guidance
- Complex estates may require specialist advice