UK Inheritance Tax
Calculator 2026

The standard Nil-Rate Band (NRB) is £325,000 — the amount of an estate that's IHT-free, frozen since 2009. The Residence Nil-Rate Band (RNRB) of £175,000 was introduced in April 2017 and applies when a qualifying residence is left to direct descendants (children, grandchildren, including step- and adopted).

Combined: £500,000 per individual; £1,000,000 for a married couple or civil partners (the surviving spouse can transfer the deceased's unused NRB and RNRB). Both bands are frozen until 5 April 2031: Autumn Statement 2022 and Spring Budget 2024 took the freeze to April 2030, and the Autumn Budget 2025 on 26 November 2025 extended it by a further year.

The amounts did not change — only the end date — which means the NRB will have stood at £325,000 for 22 years by 2031, so ordinary asset growth keeps pulling more estates over the line without the headline 40% rate moving. Above the combined threshold, the standard rate is 40%.

RNRB is an additional £175,000 IHT-free allowance available when a qualifying residence (your main home) is left to direct descendants on death. Conditions: (1) you owned the property as your main residence at some point. (2) The beneficiary is a 'lineal descendant' — children, grandchildren, step/adopted/foster children, but NOT siblings/nieces/nephews (unless they are also lineal descendants of yours). (3) The estate's net value (before reliefs) doesn't exceed £2 million — above this threshold, the RNRB tapers down by £1 for every £2 of estate value, fully eliminated at £2.35 million estate (£500K above threshold).

Downsizing additions: if you've sold a more expensive home before death and downsized, an additional RNRB-equivalent may be claimable on assets passing to descendants.

Lifetime gifts (called Potentially Exempt Transfers or PETs) are added back to the estate for IHT purposes if you die within 7 years of making the gift. The taper applies to gifts that exceed your NRB, NOT below it.

Gift made: 0-3 years before death → 40% IHT. 3-4 years → 32%. 4-5 years → 24%. 5-6 years → 16%. 6-7 years → 8%. 7+ years → 0% (fully outside estate). Important: taper reduces the TAX RATE on the gift, not the gift's value.

Gifts within the £325k NRB don't benefit from taper because they wouldn't be taxed anyway. The 7-year rule applies to most gifts to individuals, but specific lifetime exemptions also exist (annual £3k, small gifts £250, wedding gifts, charity, regular gifts from income).

Annual exemptions per FY 2026-27 (unchanged in cash terms): (1) Annual exemption — £3,000 per donor per tax year (can carry forward 1 year if unused). (2) Small gifts — up to £250 per recipient per year (cannot combine with annual exemption to same person). (3) Wedding/civil partnership gifts — £5,000 (parent), £2,500 (grandparent), £1,000 (other). (4) Gifts to spouse/civil partner — unlimited where both are long-term residents; capped at £325,000 where a long-term resident transfers to a NON-long-term-resident spouse. Note the basis changed: domicile was abolished for IHT on 6 April 2025 and replaced by 'long-term residence' — UK resident for at least 10 of the previous 20 tax years — so the old 'UK domiciled / non-domiciled' framing no longer applies.

A non-LTR spouse can elect to be treated as LTR, and that election runs until 10 consecutive tax years of non-residence have elapsed. (5) Charity gifts — unlimited, fully IHT-free. (6) Political party gifts — unlimited if party qualifies. (7) Regular gifts from surplus income — unlimited if you can prove they came from income (not capital), didn't reduce your standard of living, were habitual.

If you leave at least 10% of your 'baseline amount' to qualifying charities, the IHT rate on the rest of the taxable estate falls from 40% to 36%. The baseline is the estate after debts, exemptions and the nil-rate band, with the charity gift ADDED BACK — so the test is 10% of (taxable estate + gift).

Example: £750k estate, £325k NRB, £100k charity gift. Taxable estate = £325k; baseline = £325k + £100k = £425k, so the 10% threshold is £42.5k. £100k ≥ £42.5k → 36% applies: tax £117,000 instead of £130,000, saving £13,000, and the family receives £533,000.

The smallest gift that qualifies, £42.5k, leaves tax of £137,700 and £569,800 for the family. So giving £100k rather than £42.5k costs the family £36,800 (and with no gift at all they would receive £580,000).

The arithmetic of when the 36% rate is worthwhile is non-obvious and depends on the gap between actual charity gift and the 10% threshold. Worth modelling for any estate above £325k.

Yes — surviving spouses/civil partners can claim the deceased partner's unused NRB and RNRB. If your spouse died and left their entire estate to you (spouse exemption: 100% IHT-free), their full £325k NRB and £175k RNRB transfer to your estate.

Combined total available on second death: £325k × 2 + £175k × 2 = £1,000,000. The Transferable Nil-Rate Band (TNRB) is claimed via Form IHT402 and can apply even decades after the first death (no time limit).

The percentage of the deceased spouse's NRB/RNRB that wasn't used is what transfers — if they used 50% of their NRB on non-spouse gifts, only 50% transfers.

BPR provides 100% or 50% IHT relief on qualifying business assets owned for at least 2 years before death (or transferred 2+ years before death). 100% relief applies to: unquoted shares (private companies), unincorporated businesses (sole traders, partnerships), unquoted shares in trading companies, controlling shareholdings (>50%) in quoted companies. 50% relief: minority shareholdings in quoted companies, land/buildings/machinery used by partnership or company controlled by the deceased. NOT eligible: companies whose business is wholly or mainly investment, dealing in stocks/securities, holding investments. ⚠ THE RULES CHANGED ON 6 APRIL 2026 AND THE CHANGE IS NOW IN FORCE — this is no longer a proposal.

Agricultural Property Relief and Business Property Relief now share a single combined allowance of £2,500,000 per person for 100% relief; qualifying value above that allowance gets 50% relief, which produces an effective IHT rate of 20% rather than full exemption. The allowance is transferable between spouses and civil partners, so a couple can pass on up to £5,000,000 of qualifying agricultural and business assets at 100% relief, on top of the NRB and RNRB. ⚠ Note the widely-circulated £1,000,000 figure is OUT OF DATE: that was the level announced at the Autumn Budget 2024, and the government raised it to £2,500,000 on 23 December 2025 before the reform took effect.

Many articles published in 2025 still quote £1m. Verify your own position at gov.uk before relying on any figure, and take STEP-qualified advice for business or farm succession.

For deaths before 6 April 2027 (including now, in FY 2026-27): most unused defined contribution pension pots sit OUTSIDE the estate for IHT — passed tax-free to beneficiaries if death occurs before age 75, or at the beneficiary's marginal income tax rate after 75, with no IHT either way. ⚠ THIS IS NOW LAW, NOT A CONSULTATION. The Finance Act 2026 received Royal Assent on 18 March 2026 and brings most unused pension funds and death benefits into the estate for IHT purposes for deaths on or after 6 April 2027.

An 'unused' pension is one that has not been used to claim an income; for money-purchase arrangements that means the whole remaining pot. The existing exemption for benefits passing to a surviving spouse or civil partner is MAINTAINED.

The Act also lets personal representatives ask a scheme to withhold up to 50% of a benefit entitlement for up to 15 months after the end of the month of death, so the estate can meet the IHT bill. Defined benefit pensions paying continuing income to a spouse or dependant remain outside IHT.

This is the most material IHT planning shift in 20 years — note it changes the answer to 'should I spend my pension last?', which was the standard advice under the old treatment.

IHT is due 6 months after the end of the month in which the person died. Example: death in March → IHT due by 30 September.

After that, HMRC charges late-payment interest, which compounds daily and starts the day after the due date with no grace period. The rate is BASE RATE + 4% (it moved from base + 2.5% on 6 April 2025), so at the Bank of England base rate of 3.75% it is 7.75%, the level in force since 9 January 2026.

Check the current figure at gov.uk before relying on it — it moves with the base rate. The personal representatives (executors named in the will, or court-appointed administrators if intestate) calculate IHT, file Form IHT400 (or IHT205 for excepted estates), and pay from estate assets.

For property and unquoted shares, IHT can be paid in 10 annual instalments (with interest). The 'Direct Payment Scheme' allows HMRC to take IHT directly from the deceased's bank accounts before probate is granted.

Beneficiaries don't generally pay IHT directly — the estate pays before distribution. Failure to pay can delay probate, blocking property sale and asset distribution.

Common UK IHT planning strategies (mechanics, not advice — verify with an STEP-qualified solicitor): (1) Use lifetime gift exemptions annually (£3k AE + small gifts + wedding gifts + regular gifts from surplus income). (2) Make 7-year-rule gifts well in advance — survive 7 years and the gift is fully outside the estate. (3) Spouse exemption — leave estate to spouse first, then to children on second death (TNRB doubles allowances). (4) Charitable bequests of 10%+ activate the 36% reduced rate. (5) Business and Agricultural Property Relief on qualifying assets — but note the reform that took effect 6 April 2026: 100% relief is now capped by a combined £2,500,000 APR/BPR allowance per person (transferable, so £5m for a couple), with 50% relief above it. (6) Life insurance written into trust — proceeds outside estate, fund the IHT bill. (7) Family Investment Company (FIC) for HNW transfers — replacing trusts post-2006 reform. (8) Equity release / lifetime mortgages — reduce estate value via secured debt. (9) ⚠ Pensions are no longer a long-term IHT shelter: unused pots come into the estate for deaths on or after 6 April 2027 under the Finance Act 2026, so strategies built on 'spend other assets first and leave the pension untouched' need re-checking against the new dates.