Inheritance tax calculator, 2026/27

How this is calculated

Every estate benefits from a nil rate band of £325,000, frozen until at least 5 April 2031, below which no inheritance tax is due. Where a main residence passes to children, grandchildren or other direct descendants, a further residence nil rate band of up to £175,000 can apply, bringing the combined tax-free amount to £500,000 for a single estate.

The residence nil rate band is gradually withdrawn for larger estates, tapering away by £1 for every £2 the net estate exceeds £2,000,000, so very large estates may receive no residence nil rate band at all. Everything above the combined available bands is taxed at the standard rate of 40.0%.

Married couples and civil partners can transfer any unused nil rate band and residence nil rate band to their surviving partner, potentially doubling the tax-free amount available on the second death, which this simple calculator does not model but which a full estate review should always consider.

Reliefs that reduce the bill

Business Relief and Agricultural Relief can reduce or eliminate the taxable value of qualifying business or farming assets, subject to a combined 100% relief allowance of £1,000,000 from April 2026, with relief restricted to 50% above that amount under current reforms.

Lifetime gifts made more than seven years before death generally fall outside the estate entirely, and gifts made within seven years can benefit from taper relief reducing the tax rate on a sliding scale, though the full nil rate band is used against the earliest gifts first.

Planning considerations for company owners

Shares in a trading limited company may qualify for Business Relief, but investment or property-letting companies typically do not, so the structure and activity of a family company can materially change its IHT exposure.

Pension funds are increasingly being brought within the scope of inheritance tax under recent reforms, changing long-standing planning assumptions that pensions sat outside the estate; anyone relying on that older assumption should review their plans.

Does everyone get the residence nil rate band?

No, it only applies where a qualifying residential property passes to direct descendants such as children, stepchildren or grandchildren, not to other relatives or unrelated beneficiaries, and it tapers away for larger estates.

Can nil rate bands be transferred between spouses?

Yes, any unused proportion of the nil rate band and residence nil rate band from the first spouse or civil partner to die can be claimed on the second death, potentially giving a combined allowance of up to £1 million.

Are gifts made before death always tax-free?

Only if the donor survives seven years from the date of the gift. Gifts within seven years of death can still be taxed, with taper relief reducing the rate (not the value) of tax on gifts made between three and seven years before death.

Do business assets always escape inheritance tax?

No, only if they qualify for Business Relief, broadly requiring the business to be genuinely trading rather than mainly holding investments, and even then relief is now capped at 100% on the first £1 million of combined business and agricultural assets from April 2026.