Do you know how much Inheritance Tax your estate could pay?
Inheritance Tax (IHT) can reduce the amount your family and other beneficiaries receive from your estate. It can apply to the value of your property, money, investments and other assets after you die, although a number of exemptions, allowances and reliefs can reduce the amount that is taxable.
Our free UK Inheritance Tax Calculator helps you estimate the potential IHT on your estate. It can take into account your property, savings, investments, pensions, other assets, debts, gifts and who you intend to leave your estate to.
This can help you answer an important question: how much could my family have to pay in IHT?
The result is an illustration rather than a calculation of your actual tax liability. The rules around IHT can be complex, particularly where you have made gifts, own a business or agricultural property, have assets held in trust or have an international connection.
How is Inheritance Tax calculated?
Inheritance Tax is based on the value of your estate when you die, including your property, savings, investments, pensions and other assets.
Your debts, exemptions and available tax-free allowances are then taken into account. Inheritance Tax is generally charged at 40% on the part of your estate that exceeds your available allowances.
The calculation can be affected by factors such as your home, gifts you have made during your lifetime and whether you are married or in a civil partnership.
What is the Inheritance Tax nil-rate band?
The nil-rate band is the amount of an estate that can generally be passed on without IHT.
For 2026/27, the nil-rate band is £325,000. This threshold has been fixed at £325,000 since 2009.
You may have additional allowances depending on your circumstances. For example, unused nil-rate band can potentially be transferred between spouses or civil partners, which can increase the available allowance when the surviving partner dies.
What is the residence nil-rate band?
Your home can form part of your estate when calculating Inheritance Tax. The residence nil-rate band is an additional IHT allowance that can apply when a qualifying residence is passed to direct descendants.
For 2026/27, the residence nil-rate band is £175,000. It is subject to conditions and starts to taper when the value of the estate exceeds £2 million.
Not every estate will qualify for the full allowance. The type of property, who receives it and the value of the estate can all affect whether the residence nil-rate band is available. If you own more than one property, have downsized or no longer own the home you previously lived in, the rules can become more complicated.
How are gifts treated for Inheritance Tax?
Gifts made during your lifetime can affect the amount of IHT due after your death.
If you make a qualifying gift and survive for seven years, it will generally fall outside your estate for IHT purposes. If you die within seven years, the gift may still be taken into account when calculating IHT.
There are also exemptions for certain gifts, including the annual exemption, small gifts and some gifts made on marriage or civil partnership. Gifts between spouses or civil partners can also generally be exempt.
If you die between three and seven years after making a qualifying gift, taper relief may reduce the rate of IHT that applies.
If you have made significant gifts, it is important to keep records of when they were made and their value.
What happens to Inheritance Tax if I am married?
Transfers between spouses and civil partners are generally exempt from IHT.
Unused portions of the nil-rate band and residence nil-rate band can also potentially be transferred to a surviving spouse or civil partner. This means a qualifying couple can potentially have up to £1 million of combined allowances available when the surviving partner dies, depending on their circumstances and the availability of the residence nil-rate band.
The way assets are owned and passed between you can therefore affect the amount of IHT payable on the second death.
Can I reduce my Inheritance Tax bill?
There are a number of legitimate ways in which the amount of IHT payable may be reduced, depending on your circumstances.
These can include making gifts during your lifetime, making use of available exemptions and allowances, leaving assets to a spouse or civil partner or charity, and considering relevant business or agricultural reliefs where the conditions are met.
However, Inheritance Tax planning can have wider consequences. Giving assets away may affect your own financial security, while trusts and other arrangements can have their own tax and legal rules.
It is therefore important to consider estate planning alongside your own financial needs rather than focusing only on reducing the potential tax bill.
Should I speak to a financial adviser about Inheritance Tax?
An Inheritance Tax calculator can help you understand the potential tax on your estate, but it cannot account for every aspect of your circumstances.
A regulated financial adviser can help you consider how IHT planning fits alongside your investments, pensions, property, income and wider financial plans. A tax adviser or solicitor may also be able to help with more complex estate planning, including gifts, trusts, wills and business or agricultural assets.
Before making changes to your estate, it can be useful to consider not just the potential Inheritance Tax saving, but also the effect on your own financial security, the assets you may want to pass on and how your circumstances could change over time.
If you would like help assessing your options, you can use the Trusted Advisor adviser matching service to find a regulated financial adviser suited to your needs. Alternatively, email our team at hello@trusted-advisor.co.uk and we can help you understand the next steps.