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Inheritance Tax Calculator

Estimate the inheritance tax liability on your estate. See how nil-rate bands, the residence nil-rate band, and gifts affect your IHT bill.

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Enter your estate details and click calculate to see your inheritance tax estimate.

How Inheritance Tax Works in the UK

Inheritance tax (IHT) is a tax on the estate of someone who has died. It is charged at 40% on the value of the estate above the tax-free threshold. The estate includes property, savings, investments, life insurance payouts (unless written in trust), and personal possessions.

Only around 4% of UK estates pay IHT each year, but rising property values mean more families are being caught. HMRC collected £7.5 billion in IHT in 2023/24 — a record high.

Understanding the Nil-Rate Band

Every individual has a nil-rate band (NRB) of £325,000 — the amount that can be passed on tax-free. This threshold has been frozen since 2009 and is expected to remain at £325,000 until at least April 2028. Married couples and civil partners can transfer any unused NRB to the surviving spouse, potentially doubling it to £650,000.

The Residence Nil-Rate Band (RNRB)

Introduced in 2017, the residence nil-rate band provides an additional £175,000 per person when you leave your main home to direct descendants — children, stepchildren, grandchildren, or their spouses. For married couples, this can add up to £350,000, bringing the total combined tax-free threshold to £1 million.

However, the RNRB is tapered for estates worth over £2 million. It is reduced by £1 for every £2 the estate exceeds £2 million, meaning it disappears entirely for estates worth £2.35 million or more (single) or £2.7 million (couples).

The 7-Year Rule and Gift Planning

Gifts made more than 7 years before death are completely exempt from IHT. Gifts made within 7 years are called potentially exempt transfers (PETs). If you die within 7 years of making a gift, it becomes chargeable and uses up your nil-rate band first. Taper relief reduces the IHT rate on gifts made 3–7 years before death:

3–4 years

32%

4–5 years

24%

5–6 years

16%

6–7 years

8%

Ways to Reduce Your IHT Liability

Common strategies include making use of annual gift exemptions (£3,000 per year), gifts out of surplus income, leaving assets to a spouse or civil partner (exempt transfers), donating to charity (which can also reduce the IHT rate to 36%), setting up trusts, and taking out life insurance written in trust to cover the expected IHT bill. An estate planning adviser can help you implement these strategies within the law.

FAQ
What is the inheritance tax threshold for 2024/25?
The nil-rate band is £325,000 per person. With the residence nil-rate band of £175,000, a single person leaving their home to direct descendants can pass on up to £500,000 tax-free. Married couples can combine allowances for up to £1 million tax-free.
Do I need to pay inheritance tax on my parents' house?
It depends on the total value of the estate. The house itself is not taxed separately — it is included in the total estate value. If the total estate (including the house) exceeds the available nil-rate bands, IHT will be due on the excess at 40%. The residence nil-rate band can help — if your parents leave their home to you as a direct descendant, up to £175,000 of its value is tax-free per parent. IHT is paid by the estate before assets are distributed, not by the beneficiaries directly.
Is life insurance subject to inheritance tax?
Yes, unless it is written in trust. A life insurance payout forms part of the deceased's estate and is subject to IHT if the total estate exceeds the tax-free threshold. Writing a life insurance policy in trust means the payout goes directly to the beneficiaries without forming part of the estate — and it is not subject to probate either. This is a very common estate planning technique.
What is the 7-year rule for inheritance tax gifts?
If you make a gift and survive for at least 7 years, the gift is completely exempt from IHT. If you die within 7 years, the gift is treated as a "potentially exempt transfer" and may be subject to tax. The gift first uses up your nil-rate band. If the total gifts within 7 years exceed the nil-rate band, tax is charged on the excess. Taper relief reduces the rate for gifts made 3–7 years before death. Note: small gifts up to £250 per person per year, the annual £3,000 exemption, and gifts from normal income are always exempt regardless of the 7-year rule.
Can I reduce my inheritance tax bill by leaving money to charity?
Yes. Gifts to registered charities are exempt from IHT entirely and also reduce the value of your estate. Additionally, if you leave at least 10% of your net estate to charity, the IHT rate on the rest of the estate is reduced from 40% to 36%. This can result in your beneficiaries receiving more after tax, even though you have given money away.
What is the residence nil-rate band taper?
For estates worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 over the threshold. This means the full £175,000 RNRB disappears entirely once the estate reaches £2.35 million. For married couples, the combined RNRB of £350,000 tapers away by £2.7 million. Estate planning strategies such as lifetime gifting can help bring the estate below the taper threshold.
When is inheritance tax due and who pays it?
IHT is normally due within 6 months of the end of the month in which the person died. It is paid by the personal representatives (executors or administrators) from the estate before assets are distributed to beneficiaries. For estates that include property, HMRC offers the option to pay IHT on property in instalments over 10 years if the property cannot be sold quickly.

Need estate planning advice?

An estate planning specialist can help you structure your assets to minimise inheritance tax legally, set up trusts, and ensure your wishes are carried out. Find an FCA-authorised adviser near you.

Find an Adviser

This calculator uses 2024/25 IHT thresholds and rates. The nil-rate band (£325,000) has been frozen since 2009 and the residence nil-rate band is £175,000. These thresholds are expected to remain frozen until at least April 2028. This calculator does not account for all IHT reliefs (such as business property relief, agricultural relief, or the 36% charitable rate). Transfers between spouses and civil partners are exempt from IHT. This calculator is for illustration purposes only and does not constitute financial or tax advice. approval.co.uk is not authorised by the FCA and does not provide financial advice. Always consult a qualified adviser or tax professional before making estate planning decisions.