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 2030 per Autumn Statement 2022 + Spring Budget 2024 extensions. 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 2025-26: (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 (UK domiciled), £325k cap (non-UK domiciled spouse). (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 'net estate' (after deducting NRB, debts, exemptions) to qualifying charities, the IHT rate on the remainder reduces from 40% to 36%. Net estate is the figure used to calculate IHT — not gross. Example: £750k estate, £325k NRB, £100k charity gift. Net taxable = £325k. Charity 10% threshold = £32.5k. £100k ≥ £32.5k → 36% rate applies. Tax saved vs 40% on £325k = 4% × £325k = £13,000. So leaving £100k to charity instead of £32.5k effectively costs the family £67.5k − £13k tax saved = £54.5k. 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. BPR is one of the most valuable IHT planning tools — eligible AIM-listed shares can qualify for 100% relief and have been used by some HNW individuals to reduce IHT exposure. Note: Autumn Statement 2024 announced changes to BPR for AIM shares from April 2026 (50% relief instead of 100% — verify before relying on this).

Currently (FY 2025-26 — but changing): Defined contribution pension pots are GENERALLY outside the deceased's estate for IHT purposes if death occurs before age 75 (passed tax-free to beneficiaries) or after 75 (passed at beneficiary's marginal income tax rate, no IHT). This makes pensions a key IHT-planning vehicle. ⚠ Major change announced: from April 2027, unused pension pots WILL be brought into the IHT net per Autumn Statement 2024. The exact mechanics are still being consulted on as of mid-2025, but the direction is clear — pensions will lose their IHT-shelter status. Defined benefit pensions paying continuing income to a spouse/dependant remain outside IHT. This change is one of the most material IHT planning shifts in 20 years and is driving widespread review of high-net-worth estate plans.

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 interest at 7.5% (FY 2025-26 indicative, follows base + 2.5%). 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 Property Relief on qualifying assets (private company shares, AIM stocks until April 2026 changes). (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) Pension contributions (until April 2027) — pensions outside IHT until rules change.