Free UK Inheritance Tax Calculator updated for 2026/27.
UK Inheritance Tax Calculator
🏠 Estate & Assets
Use the UK inheritance tax calculator 2026/27 above to get an instant estimate of what your estate might owe. Below, we've broken down exactly how the calculator works, what each field means, and how the rules have changed heading into the new tax year - so you're not just getting a number, but actually understanding where it came from.
What Is Inheritance Tax and Who Actually Pays It?
Inheritance Tax (IHT) is charged on the value of everything you own when you die - your property, savings, investments, car, jewellery, and any other assets - once you subtract what you owe. It's often called Britain's most disliked tax, mainly because most people only really think about it once, usually while dealing with a parent's estate, and by then there's little time left to plan around it.
Here's the bit people get wrong most often: Inheritance Tax isn't paid by whoever receives the money. It's paid by the estate itself, before anything is handed out to family or friends. The executor (or administrator, if there's no will) works out the bill and settles it with HMRC, usually using funds from the estate before probate is finalised.
Not every estate pays it, though. Thanks to the nil-rate band and residence nil-rate band explained below, a couple can often pass on up to {GBP}1,000,000 completely tax-free - which is why using an inheritance tax threshold 2026 calculator before assuming you'll owe anything is worth doing.
UK Inheritance Tax Thresholds and Rates for 2026/27
These are the figures the calculator above is built on, confirmed for the 2026/27 tax year:
| Allowance / Rate | Amount | Applies when |
|---|---|---|
| Nil-rate band (NRB) | {GBP}325,000 | Everyone gets this, regardless of what you leave or to whom |
| Residence nil-rate band (RNRB) | {GBP}175,000 | Your main home passes to children, grandchildren or stepchildren |
| Combined allowance (one person) | {GBP}500,000 | NRB + RNRB together, if you own a home |
| Combined allowance (married couple) | {GBP}1,000,000 | Both NRB and RNRB transferred from a deceased spouse |
| Standard IHT rate | 40% | On the value of the estate above your available allowances |
| Reduced charity rate | 36% | At least 10% of the net estate is left to charity |
| RNRB taper threshold | {GBP}2,000,000 | Estates above this lose {GBP}1 of RNRB for every {GBP}2 over |
What's Changing in Inheritance Tax From 2026 Onwards
If you're calculating your inheritance tax for 2026, there are three genuinely important changes worth knowing about - and unfortunately, quite a few sites (including some run by accountants) still haven't caught up with the final figures.
Business and Agricultural Property Relief - the {GBP}2.5 million cap
Until now, qualifying business assets and farmland could often be passed on completely free of Inheritance Tax through Business Property Relief (BPR) and Agricultural Property Relief (APR). From 6 April 2026, that changes. A combined allowance of {GBP}2.5 million per person still gets 100% relief - but anything above that only gets 50% relief, working out at an effective 20% tax rate on the excess. This allowance can also be transferred between spouses, in the same way as the standard nil-rate band. Shares listed on the AIM market, which used to qualify for full relief after a two-year holding period, are now capped at 50% relief regardless of value.
Worth flagging: the government originally proposed a much lower {GBP}1 million cap. That figure got revised upward to {GBP}2.5 million following consultation, but plenty of older articles online still quote the {GBP}1 million number - the calculator above uses the confirmed, final {GBP}2.5 million figure.
Pensions and Inheritance Tax - from April 2027
This one isn't live yet, but it's coming, and it's a big shift. From April 2027, most unused defined contribution pension pots will start counting towards your estate for Inheritance Tax purposes. Right now, pensions generally sit outside your estate entirely. If you're doing longer-term planning, it's worth toggling the pension option in the calculator to see what your position looks like once this rule takes effect.
The freeze on thresholds - now extended to 2031
As mentioned above, both nil-rate bands were already frozen, and the freeze has been pushed back further, to April 2031. In practical terms, that's over a decade of the {GBP}325,000 and {GBP}175,000 figures staying fixed while house prices and savings values keep moving.
How to Use This Inheritance Tax Calculator
The calculator is split into four short steps, and none of them need more information than you'd find on a bank statement or a property valuation. Here's what to expect at each stage:
Understanding Each Part of the Calculator
The Nil-Rate Band and Residence Nil-Rate Band
Every estate gets the {GBP}325,000 nil-rate band, no conditions attached. The residence nil-rate band is different - it's only available if your main home (or a share of it) passes to a direct descendant, and it's capped at the lower of {GBP}175,000 or the actual value of that share. So if the property share passing to your children is only worth {GBP}120,000, that's the RNRB you get - not the full {GBP}175,000. For estates worth more than {GBP}2 million, the RNRB starts tapering away, losing {GBP}1 for every {GBP}2 above that threshold, until it disappears completely around the {GBP}2.35 million mark.
Gifts and the Seven-Year Rule
Gifts made during your lifetime are known as Potentially Exempt Transfers. Survive seven years after making one, and it falls outside your estate entirely for IHT purposes. Die within those seven years, and the gift gets added back into your estate - but taper relief steadily reduces the tax owed the longer you survived after giving it away. Here's how that taper works in practice:
Effective IHT rate on a gift, based on how many years before death it was made
One detail that trips a lot of people up: taper relief reduces the tax, not the value of the gift. And every gift-giving year comes with its own {GBP}3,000 annual exemption, which the calculator deducts automatically before checking it against your nil-rate band. Gifts made more than seven years before death, and any gift fully covered by your nil-rate band, are taxed at 0%.
Business and Agricultural Property Relief
Covered in more detail above, but as a quick reference for the calculator: enter the total qualifying value of business or farming assets, and the {GBP}2.5 million cap (100% relief below it, 50% above) is applied automatically. You don't need to work out the split yourself.
Leaving Money to Charity
If you leave at least 10% of your net estate to a registered charity, the IHT rate on the rest of the estate drops from 40% to 36%. The 10% figure is measured against your estate after your allowances have been deducted, not before - the calculator handles this comparison for you and confirms whether your gift clears the threshold.
Pensions, Trusts, and Downsizing
The "more options" section covers three less common but genuinely useful scenarios: including a pension pot under the incoming April 2027 rules, adding a rough value for assets held in trust, and applying a downsizing addition if you've already sold a larger home and moved somewhere smaller (this preserves some of the RNRB you'd otherwise lose).
Married Couples and the {GBP}1 Million Allowance
This is one of the most searched questions around Inheritance Tax, and the short answer is: yes, it's genuinely possible for a married couple or civil partnership to pass on up to {GBP}1,000,000 tax-free. Here's how it adds up:
How a couple reaches {GBP}1,000,000 tax-free
This only works to its full extent if the first spouse didn't use up their own allowances (everything left to a surviving spouse is automatically exempt from IHT, so this is usually the case) and if the family home is being passed down to children or grandchildren on the second death.
Worked Example: How Much Tax Would a {GBP}500,000 Estate Pay?
Numbers make this much easier to picture than percentages alone, so here are two quick examples using the calculator's logic.
Example 1 - Single person, no home passed to children
Example 2 - Same estate, home worth {GBP}300,000 left to children
Same estate value, completely different outcome - purely because of who inherits the home. This is exactly why it's worth running your own numbers through the calculator rather than assuming a round figure applies to you.
Simple Ways to Reduce Your Inheritance Tax Bill
Full estate planning is a job for a qualified adviser, especially once business assets, trusts, or overseas property are involved. That said, there are a handful of well-established, low-risk steps most people can consider:
- Use your annual gift exemption. {GBP}3,000 a year, every year, falls outside your estate immediately - and it can be carried forward one tax year if unused.
- Make gifts early. The seven-year rule means the sooner a gift is made, the sooner it stops counting towards your estate.
- Leave your home to direct descendants. It's the only way to unlock the residence nil-rate band.
- Consider a charitable gift. Beyond the goodwill, clearing the 10% threshold drops your whole rate to 36%.
- Look into life insurance written in trust. It won't reduce the tax bill itself, but it can cover it, so your family isn't forced to sell assets quickly to pay HMRC.
- Review pension plans before April 2027. With pensions due to join the taxable estate, it's worth understanding your position ahead of the change rather than after it.
Frequently Asked Questions
How much inheritance tax will I pay in the UK?
Do I have to pay Inheritance Tax on gifts?
What is the inheritance tax threshold for 2026/27?
Will my pension be taxed as part of my estate?
How does Business Property Relief work from 2026?
Can married couples really pass on {GBP}1 million tax-free?
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