Inheritance Tax on £1 Million Estate UK: How Much IHT, All Scenarios, and Ways to Reduce It (2026)
A married couple with a home and children can pay £0 IHT on a £1 million estate — the four IHT thresholds add up to exactly £1m. A single person faces £200k–£270k. The difference comes down to marital status, how the estate is left, and whether the right forms are filed.
| Scenario | Estate | Thresholds Available | Chargeable | IHT Due | Notes |
|---|---|---|---|---|---|
| 1. Single person — no RNRB (no qualifying residential property, or property not passing to lineal descendants, or estate left to non-direct family) | £1,000,000 | NRB: £325,000 only (no RNRB — either no qualifying property or not passing to s8K IHTA lineal descendants) | £1,000,000 − £325,000 = £675,000 | £675,000 × 40% = £270,000 | Common situation: estate includes savings/investments only; or house left to siblings/friends; or house left to discretionary trust (RNRB not available — must pass to lineal descendants absolutely or via IPDI s49A IHTA). NRB: £325k (s8C IHTA — frozen to at least April 2030). No tNRB available (no prior spouse). Deductions: funeral expenses (HMRC IHTM28000); outstanding liabilities (s5 IHTA); mortgage on property (deducted from property value before applying NRB). |
| 2. Single person — with NRB + RNRB (qualifying residential property passing to children or lineal descendants) | £1,000,000 | NRB: £325,000 (s8C IHTA) + RNRB: £175,000 (s8D IHTA) = £500,000 combined threshold | £1,000,000 − £500,000 = £500,000 | £500,000 × 40% = £200,000 | RNRB conditions (s8H IHTA): (1) a qualifying residential property (one the deceased lived in or was entitled to live in at some point); (2) passing to lineal descendants (s8K IHTA — children, grandchildren, step-children, adopted children, foster children in care; not nieces/nephews/siblings/friends). Estate at £1m: well below £2m RNRB taper threshold — full RNRB available. RNRB taper: £1 for every £2 above £2m adjusted net estate (s8E IHTA). No taper on £1m estate. If the property value is less than £175k: RNRB is limited to the property value (s8H(2) IHTA), but a 'downsizing allowance' (s8FA-8FE IHTA) may preserve RNRB if the deceased downsized or sold property after 8 July 2015. |
| 3. Widowed person (surviving spouse/CP) — all 4 thresholds (tNRB + tRNRB — both MUST be claimed; NOT automatic) | £1,000,000 | tNRB: £325,000 (s8A IHTA) + own NRB: £325,000 = £650,000. tRNRB: £175,000 (s8G IHTA) + own RNRB: £175,000 = £350,000. Total: £650,000 + £350,000 = £1,000,000 | £1,000,000 − £1,000,000 = £0 | £0 | tNRB conditions (s8A IHTA): (1) prior spouse/CP must have died before the current deceased; (2) unused NRB from first death is transferred; (3) executor of second estate MUST claim tNRB by filing IHT402 (not automatic — if not claimed, the tNRB is lost). tRNRB conditions (s8G IHTA): similar transfer mechanism for RNRB; executor MUST claim by filing IHT436 (not automatic). First spouse's NRB: 100% of their NRB is transferred if they left their entire estate to the surviving spouse (s18 IHTA spousal exemption used in full — NRB 'wasted' at first death but can be transferred). NRB discretionary trust in older wills: if the first spouse left up to £325k to a NRB discretionary trust, the remaining unused NRB fraction is transferred (possibly zero). At £1m estate: widowed person with full tNRB + tRNRB pays £0 IHT — this is one of the most powerful results in IHT planning. |
| 4. Married couple — second death (first spouse left everything to surviving spouse; s18 IHTA spousal exemption applied at first death) | £1,000,000 at second death | Same as scenario 3 above: tNRB (£325k) + own NRB (£325k) + tRNRB (£175k) + own RNRB (£175k) = £1,000,000 | £0 | £0 | At first death: 100% of NRB and RNRB unused (everything to surviving spouse = fully exempt; no IHT at first death). Both unused NRB and RNRB are transferable to second estate. At second death: £1m estate = exactly at the £1m combined threshold. Filing: tNRB requires IHT402; tRNRB requires IHT436. Both MUST be proactively claimed on IHT400. Warning: if the first spouse's will left a 'nil-rate band legacy' (up to £325k to a trust or other beneficiary), that fraction of NRB was USED at the first death and is NOT transferable. Review existing wills that contain NRB discretionary trust clauses — this is a common legacy drafting in older wills that can now be harmful to the £1m threshold for couples. |
| 5. Single person with NRB + RNRB — 36% charitable rate (≥10% of baseline to charity) | £1,000,000 | NRB: £325,000 + RNRB: £175,000 = £500,000 threshold. Baseline (net estate after NRB/RNRB but before charitable gift): £500,000. 10% of baseline: £50,000 charitable legacy required to trigger 36% rate. | £1,000,000 − £500,000 = £500,000 chargeable. Less charity legacy: £500,000 − £50,000 = £450,000 × 36% | £450,000 × 36% = £162,000 (vs £500,000 × 40% = £200,000 without charity). Saving: £38,000. Net cost of £50,000 charity gift = £50,000 − £38,000 = £12,000. | 36% rate (s36 IHTA): applies when ≥10% of the 'baseline amount' is left to qualifying charity. Baseline = net estate (after deducting liabilities) after deducting available NRB and RNRB (and other exemptions except charity). If the charitable legacy is increased from, say, £25k (below 10%) to £50k (at 10%): the extra £25k to charity costs only the foregone IHT saving on that extra £25k (£25k × 36% = £9k in additional charity gift cost offset by £25k × 40% − £25k × 36% = £1k saving on the non-charity estate). Worth calculating carefully with a solicitor for any estate where significant charitable giving is planned. |
| 6. Single person — BPR or APR (business or agricultural property in estate) | £1,000,000 including £600,000 qualifying BPR asset (e.g. AIM shares held 2yr; unlisted business) and £400,000 other assets | BPR (ss103-114 IHTA): £600,000 qualifying BPR asset at 100% relief = BPR deduction £600,000. Net chargeable: £400,000. Less NRB: £325,000. Remaining: £75,000. IHT: £75,000 × 40% = £30,000 | £30,000 (vs £270,000 without BPR) | BPR (ss103-114 IHTA 1984): 100% relief on qualifying unquoted business interests, AIM shares (held ≥2yr), trading business assets. 50% relief on certain other business assets and land/buildings used in a business. IMPORTANT: April 2026 Finance Act 2026 — £1m combined BPR/APR cap introduced. Assets qualifying for BPR or APR above the combined £1m cap will only receive 50% relief, not 100%, on the excess. At £600k BPR: under the £1m cap — full 100% still applies. But for an estate with £1.5m BPR assets: the first £1m at 100%; excess £500k at 50% (£250k of £500k still chargeable). APR (ss115-124 IHTA): similar relief for qualifying agricultural property. | |
| 7. Estate with mortgage — gross vs net estate | £1,000,000 gross estate: house worth £800k (mortgage £300k outstanding) + investments £200k | Net chargeable estate: house net of mortgage = £800k − £300k = £500k + £200k investments = £700k net. Less NRB £325k + RNRB £175k = £500k. Chargeable: £700k − £500k = £200k. | £200,000 × 40% = £80,000 (not £200,000 as if on gross) | Mortgage on residential property: deducted from the property value in calculating the chargeable estate (s5(3) IHTA). Unsecured debts (credit cards, personal loans, business debts): deducted from the net estate (s5(3) and s162 IHTA). Funeral expenses (HMRC reasonable amounts): deductible (IHTM28000). Note: loans taken out to acquire excluded property (foreign assets of non-domiciliary) cannot be deducted from the UK estate — anti-avoidance rule (s162B IHTA introduced by Finance Act 2013). Relief for NRB: applied to net estate after all liabilities are deducted. |
IHT on £1 million estate UK 2026. NRB: £325,000 (s8C IHTA 1984 — frozen to April 2030). RNRB: £175,000 (s8D IHTA — qualifying residential property to lineal descendants s8K; taper above £2m net estate s8E). tNRB: s8A IHTA — transferred from prior deceased spouse/CP; claimed on IHT402 (NOT automatic; if not filed, tNRB lost). tRNRB: s8G IHTA — transferred from prior deceased spouse/CP unused RNRB; claimed on IHT436 (NOT automatic). Married couple maximum threshold: £325k + £325k + £175k + £175k = £1,000,000. Spousal exemption: s18 IHTA — unlimited; transfers all NRB/RNRB unused. IHT400: estate administration return; must be submitted with IHT402/IHT421/IHT436 where applicable. RNRB lost if property to discretionary trust (not IPDI s49A IHTA). Downsizing allowance: s8FA-8FE IHTA — preserves RNRB on post-8 July 2015 downsizes/sales. 36% rate: s36 IHTA — ≥10% of baseline to qualifying charity. BPR: ss103-114 IHTA — 100%/50% relief on qualifying business assets; £1m combined BPR/APR cap from April 2026 (Finance Act 2026). APR: ss115-124 IHTA — qualifying agricultural property. Mortgage deduction: s5(3) IHTA — deducted from property value. Funeral expenses: IHTM28000 — deductible. IHT payable 6 months after end of month of death (s226 IHTA). Instalment option: s227 IHTA — IHT on property paid in 10 annual instalments (interest-free for qualifying unsaleable assets).
£1 Million Estate IHT: Complete Guide
How IHT works on a £1 million estate — the key factors
Whether £1 million triggers IHT, and how much, depends almost entirely on: (1) marital/civil partnership status at death; (2) whether there is a qualifying residential property passing to lineal descendants; (3) whether the surviving spouse's unused NRB and RNRB can be transferred. A £1 million estate is exactly at the combined NRB + tNRB + RNRB + tRNRB threshold (£325k + £325k + £175k + £175k = £1m) for a widowed person or a married couple on the second death — so IHT can be £0. But a single person with no transferable thresholds faces £200k-£270k IHT depending on whether the RNRB is available. The difference between a £0 IHT bill and a £270k IHT bill on the same £1m estate comes down entirely to marital status and how the estate is left. This is why structuring your will correctly is the most important IHT planning tool for most people — it costs little to set up but can save hundreds of thousands of pounds.
Why a £1 million estate pays £0 IHT for married couples and widows
The combination of NRB, tNRB, RNRB, and tRNRB creates a combined threshold of exactly £1,000,000 for married couples and surviving spouses/civil partners. Here is how: (1) NRB at death of second spouse: £325,000 (s8C IHTA). (2) tNRB from first spouse: £325,000 (s8A IHTA) — the unused NRB from the first death is transferred and added to the survivor's own NRB. (3) RNRB at second death: £175,000 (s8D IHTA) — if a qualifying residential property passes to lineal descendants. (4) tRNRB from first spouse: £175,000 (s8G IHTA) — if the RNRB was unused or not fully used at the first death. Total: £1,000,000. Both tNRB (IHT402) and tRNRB (IHT436) MUST be claimed by the executor of the second estate — they are NOT automatic. If the executor does not file IHT402, the tNRB is simply lost. If the executor does not file IHT436, the tRNRB is lost. For married couples and widows, ensuring a specialist estate administration solicitor files the correct forms is critical — the cost of a missed claim can be £130,000 (the IHT on the unused tNRB + tRNRB).
RNRB conditions — why the Residence Nil-Rate Band is not always available
The RNRB (Residence Nil-Rate Band — s8D IHTA 1984, £175k for 2026/27) is not available in all cases. The conditions are: (1) Qualifying residential property (s8H IHTA): a property that was the deceased's home at some point (it does not have to be the deceased's home at death — but they must have 'been entitled to live in it' at some point). Buy-to-let properties that the deceased never lived in do not qualify. Holiday homes do qualify if the deceased lived in them. (2) Passing to lineal descendants (s8K IHTA): the property must pass to children, grandchildren, step-children, adopted children, or foster children who were under the care of the deceased. It does NOT pass to siblings, nieces, nephews, friends, or charities for RNRB purposes. (3) Must pass 'closely inherited': the lineal descendants must receive the property either (a) absolutely, or (b) on a trust where they have an immediate post-death interest (IPDI — s49A IHTA). If the property passes to a discretionary trust: RNRB is NOT available (even if the trust's beneficiaries are all children). (4) Estate below £2m: RNRB is tapered away at £1 for every £2 above £2m net estate (s8E IHTA). At £1m, the RNRB taper does not apply. For those whose RNRB conditions are not met (e.g., no children; estate left to siblings), the £175k RNRB is lost — and this can significantly affect the IHT bill. The downsizing addition (s8FA-8FE IHTA): if the deceased sold or downsized their property after 8 July 2015, they may still claim RNRB up to the value of the previously owned property — preserving the RNRB even if no property passes to lineal descendants on death.
Reducing IHT on a £1 million estate — planning strategies
For a single person facing £200k-£270k IHT on a £1m estate, or a couple planning to maximise the £1m threshold, the main planning strategies are: (1) Will structure: ensure the will leaves the residential property to lineal descendants (not a discretionary trust) so the RNRB applies. For couples, ensure the first spouse's will does NOT include a NRB discretionary trust legacy that wastes the NRB at the first death (these were popular in older wills but reduce the tNRB available). Review wills that contain 'nil-rate band' legacy clauses. (2) Lifetime giving — PETs (s3A IHTA): gifts to individuals start a 7-year clock; if the donor survives 7 years, the gifts fall out of the estate. For a £1m estate where the owner is in good health, making structured annual gifts (£6k per year — annual exemption + carry-forward, or more if normal expenditure from income qualifies) reduces the estate over time. (3) Normal expenditure from income (s21 IHTA): if there is surplus income, establishing a pattern of regular gifts to children can remove substantial amounts from the estate permanently with no 7-year clock. (4) Life insurance in trust: a term or whole-of-life policy written in trust (outside the estate) can provide a lump sum to pay any IHT due, preserving the estate for beneficiaries without the estate being sold. (5) Charitable giving (36% rate — s36 IHTA): if ≥10% of the baseline amount is left to charity, the reduced 36% rate applies on the remaining chargeable estate. At a £1m single estate: this could save £38k. (6) BPR/APR: if business or agricultural property forms part of the estate, 100% BPR/APR may apply (subject to the £1m combined cap from April 2026).
NRB discretionary trusts in older wills — a legacy planning problem
Many wills drafted before 2007 (and some thereafter) contain a 'nil-rate band discretionary trust' — a provision leaving the NRB amount (or the NRB legacy of up to £325k) to a trust on the first death, with the rest going to the surviving spouse. These wills were drafted when the NRB could not be transferred between spouses (the tNRB was only introduced by the Finance Act 2008). The purpose was to ensure the first spouse's NRB was used and not wasted. But since October 2007, the tNRB allows 100% of the first spouse's unused NRB to be transferred — making the NRB discretionary trust clause both unnecessary and potentially harmful. The harm: if the first spouse leaves £325k to a NRB discretionary trust (on first death), the NRB is used (by the trust); only a zero % unused fraction is available to transfer to the second estate (tNRB = fraction of unused NRB at first death). For a £1m estate on second death: (a) with NRB trust in old will: £1m − £325k − £175k − £175k = £325k chargeable × 40% = £130k IHT (because the £325k tNRB is not available); (b) without NRB trust (modern will leaving everything to survivor): £1m − £1m threshold = £0 IHT. The old-style NRB discretionary trust costs £130k of unnecessary IHT on a £1m estate. Reviewing and updating wills to remove NRB discretionary trust clauses — or replacing them with IPDI or absolute legacy structures — is one of the most valuable will-planning steps for older couples.
Frequently Asked Questions
How much inheritance tax do you pay on a £1 million estate in the UK?
It depends on your circumstances. Single person, no qualifying residential property (or not leaving it to children/lineal descendants): £1m − £325k NRB = £675k × 40% = £270,000 IHT. Single person with NRB + RNRB (residential property to children): £1m − £500k = £500k × 40% = £200,000 IHT. Widowed person or married couple on second death with all 4 thresholds (tNRB + tRNRB + NRB + RNRB = £1m): £1m − £1m = £0 IHT. Married couples and widows with a qualifying home and children can pay £0 IHT on a £1 million estate. tNRB (IHT402) and tRNRB (IHT436) must both be proactively claimed by the executor — they are not automatic.
Do married couples pay inheritance tax on a £1 million estate?
Not if both thresholds are properly claimed. The combined NRB + tNRB + RNRB + tRNRB = £325k + £325k + £175k + £175k = £1,000,000. A married couple where the first spouse leaves everything to the surviving spouse (using the s18 IHTA unlimited spousal exemption) transfers all unused NRB and RNRB to the second estate. On the second death, if the estate is £1m and includes a qualifying residential property passing to children: IHT = £0. The tNRB must be claimed on IHT402 and tRNRB on IHT436 when the second estate is administered. If these forms are not filed, the transferred thresholds are lost. Also check: if the first spouse's will contained a 'nil-rate band discretionary trust' clause (common in pre-2007 wills), some or all of the tNRB may have been used at the first death — reducing the amount transferable.
Is £1 million above the IHT threshold?
It depends on your situation. The basic NRB is £325,000 — so a £1m estate is well above the basic threshold. However: (1) With NRB + RNRB (single with property to children): £500k combined — £1m is £500k above threshold. (2) With all 4 thresholds for married couple/widow (tNRB + NRB + tRNRB + RNRB = £1m): a £1m estate is exactly AT the threshold — £0 IHT. (3) With BPR/APR: the qualifying assets reduce the chargeable estate below the threshold, potentially eliminating IHT on a £1m estate that includes business or agricultural assets. NRB is frozen at £325k to at least April 2030. Whether £1m 'triggers IHT' depends entirely on: marital status; whether a qualifying home passes to lineal descendants; whether all transferable thresholds are claimed; and whether any reliefs (BPR, APR, charity) apply.
What is the RNRB and does my £1 million estate qualify?
The Residence Nil-Rate Band (RNRB — s8D IHTA 1984) is an additional IHT threshold of £175,000 (2026/27) for estates where a qualifying residential property passes to lineal descendants (children, grandchildren, step-children, etc.). For a £1m estate: the RNRB taper does NOT apply (taper only starts above £2m net estate — s8E IHTA). The RNRB is available if: (1) you own (or have previously owned) a residential property you lived in; (2) the property passes to lineal descendants either absolutely or via an IPDI trust (s49A IHTA); and (3) the net estate is below £2m. The RNRB is NOT available if: the property passes to a discretionary trust; there is no qualifying residential property; or the property passes to non-lineal descendants (siblings, nieces, friends). Downsizing allowance (s8FA-8FE IHTA): if you sold or downsized your home after 8 July 2015, you may still claim RNRB up to the value of the previous property even if no property passes on death.
How can I reduce IHT on my £1 million estate?
The most effective strategies for a £1m estate are: (1) Will structure: leave the residential property absolutely to children (not to a discretionary trust) to ensure RNRB is available; remove old NRB discretionary trust clauses from older wills. (2) Spousal planning: married couples and civil partners can use the tNRB and tRNRB to bring the combined threshold to £1m — ensure first spouse's will is structured to preserve the full tNRB (leave everything to survivor at first death). (3) Lifetime gifting: annual exemption (s19 IHTA — £3k/yr; £6k with carry-forward); normal expenditure from income (s21 IHTA — uncapped; surplus income only); PETs (s3A IHTA — IHT-free if 7 years survival). (4) Charitable giving (s23 IHTA + s36 36% rate): leaving ≥10% of the baseline to charity reduces IHT rate to 36% — can save £38k on a £500k chargeable estate. (5) Life insurance in trust: policy pays out outside the estate, meeting the IHT bill without forced sale. (6) BPR/APR: if business or agricultural property is in the estate, 100% relief may eliminate IHT on those assets (subject to April 2026 £1m cap).
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