Inheritance Tax on £1 Million Estate UK: How Much IHT, All Scenarios, and How to Pay Less (2026)
A single person with a £1m estate could pay £200,000 in IHT — or £0 if the thresholds are correctly structured. A married couple with a £1m estate can almost always achieve £0 IHT using four combined thresholds, but only if the will and the claims are right.
| Scenario | NRB | RNRB | tNRB | tRNRB | Total Threshold | IHT Payable |
|---|---|---|---|---|---|---|
| Single person — £1m estate — home passes to children (direct descendants) | £325,000 (own NRB) | £175,000 (RNRB — s8D IHTA — home to direct descendants) | None (single; no deceased spouse) | None | £500,000 | £200,000 (40% × £500k) |
| Single person — £1m estate — home does NOT pass to direct descendants (discretionary trust, friend, or no RNRB) | £325,000 (own NRB) | £0 (RNRB not available — no closely inherited qualifying residential interest) | None | None | £325,000 | £270,000 (40% × £675k) |
| Widowed person — £1m estate — BOTH spouses' NRBs and RNRBs available and claimed | £325,000 (own NRB) | £175,000 (own RNRB — s8D IHTA) | £325,000 (100% transferred NRB from first spouse — s8A IHTA; IHT402 — NOT automatic) | £175,000 (100% transferred RNRB — s8G IHTA; IHT436 — NOT automatic) | £1,000,000 | £0 — the combined £1m threshold exactly covers the entire £1m estate |
| Married couple — £1m total estate — both names on home — first death | £325,000 (first spouse's NRB — but used to cover estate passing to surviving spouse? No — s18 exempt) | £175,000 — but RNRB NOT USED on first death if all goes to spouse by survivorship or will (not closely inherited by direct descendants) | N/A (first death) | N/A (first death) | Unlimited spousal exemption (s18 IHTA) — no IHT on first death | £0 IHT on first death (everything to surviving spouse = s18 exempt, no limit) |
| Married couple — £1m total estate — second death (surviving spouse) | £325,000 (own NRB) | £175,000 (own RNRB — s8D IHTA) | £325,000 (tNRB — IHT402 — NOT automatic) | £175,000 (tRNRB — IHT436 — NOT automatic) | £1,000,000 | £0 on a £1m estate — IF all four thresholds claimed and home passes to direct descendants |
| Single person — £1m estate — charitable legacy (36% reduced rate, s36 IHTA) | £325,000 (own NRB) | £175,000 (own RNRB — home to children) | None | None | £500,000 (NRB + RNRB) | 36% rate if charitable legacy ≥ 10% of baseline (£500k × 10% = £50k to charity). IHT = 36% × £450k (residue after £50k charity) = £162k. Saving vs 40%: £38k. Net cost of £50k charity donation to family: £12k (HMRC paid 76% of the donation cost) |
| Single person — £1m estate — makes £200k lifetime PETs (survives 7yr) | £325,000 (own NRB) | £175,000 (own RNRB) | None | None | £500,000 | £0 IHT on £800k estate with £500k threshold: chargeable £300k — still above £500k threshold? No: £800k − £500k = £300k; IHT = 40% × £300k = £120k. Better: if total PETs reduce estate to ≤ £500k threshold then IHT = £0. PETs of £500k would be needed to bring estate from £1m to £500k: IHT = £0 if survived 7yr |
IHT 2026-27: 40% on chargeable estate above threshold; 36% if ≥10% of baseline to qualifying charity (s36 IHTA 1984). NRB: s8C IHTA 1984 — £325,000; frozen to at least 2030. RNRB: s8D IHTA 1984 — £175,000; qualifying residential interest (QRI) closely inherited by direct descendants (s8K IHTA — children, grandchildren, step-children, foster children); NOT automatic; claim IHT435. tNRB: s8A IHTA 1984 — up to 100% of first spouse/CP's unused NRB; NOT automatic; claim IHT402; 2yr deadline from end of tax year of second death. tRNRB: s8G IHTA 1984 — up to 100% of first spouse/CP's unused RNRB; NOT automatic; claim IHT436; same 2yr deadline. RNRB taper: s8E IHTA — £1 RNRB lost per £2 excess above £2m adjusted net estate; £1m estate = no taper. Spousal exemption: s18 IHTA — unlimited; on first death all to surviving spouse = £0 IHT. PETs: s3A IHTA — gifts to individuals; 7yr clock; taper relief s7(4) IHTA (years 3-7). Annual exemption: s19 IHTA — £3k/yr. Normal expenditure from income: s21 IHTA — uncapped; immediate. AIM BPR: s105(1)(bb) IHTA — 100% after 2yr; subject to April 2026 £1m combined BPR/APR cap (Finance Act 2026). Charitable legacy 36% rate: s36 IHTA — ≥10% of baseline (net estate after NRB/RNRB); IHT drops to 36% on remainder. IHT400: required for non-excepted estates; IHT402 (tNRB); IHT435 (RNRB); IHT436 (tRNRB). IHT421: issued by HMRC post-IHT400; unlocks probate.
IHT on a £1 Million Estate: Complete Guide
The basic IHT calculation for a £1m estate
Inheritance tax at 40% is charged on the portion of the estate above the available nil rate thresholds. For a £1m estate in 2026-27, the key question is which thresholds are available. The Nil Rate Band (NRB — s8C IHTA 1984) is £325,000 per person, frozen to at least 2030. The Residence Nil Rate Band (RNRB — s8D IHTA 1984) is £175,000 per person (2020-21 onwards; also frozen to at least 2030), available when a qualifying home passes to direct descendants. For a single person with no prior spouse: total threshold = NRB £325k + RNRB £175k (if home to children) = £500k. IHT = 40% × (£1m - £500k) = £200,000. This is the basic position for a single person with a £1m estate. However: the RNRB is only available if the home passes to direct descendants — children, grandchildren, step-children, foster children. If the home goes to a discretionary trust (even one for the benefit of children), the RNRB is LOST. Without the RNRB: threshold = NRB £325k only; IHT = 40% × £675k = £270,000. The difference: £70,000 — this is the value of getting the RNRB right.
How a married couple can achieve £0 IHT on a £1m estate
The most powerful IHT planning tool for married couples is the combination of four thresholds — two NRBs, two RNRBs — which can together provide a £1m combined threshold, exactly covering a £1m estate. How it works: (1) First death: the first spouse leaves everything to the surviving spouse. The unlimited spousal exemption (s18 IHTA 1984) means no IHT on the first death regardless of value. The first spouse's NRB (£325k) is entirely unused. The first spouse's RNRB (£175k) is also unused (because the home passed to the spouse by survivorship or will, not to direct descendants). (2) Second death: the surviving spouse's estate = £1m. The executors claim: NRB £325k (surviving spouse's own NRB); tNRB £325k (100% transferred NRB from first spouse — claimed on IHT402 — NOT automatic); RNRB £175k (surviving spouse's own RNRB — home passes to direct descendants — IHT435 — NOT automatic); tRNRB £175k (100% transferred RNRB from first spouse — IHT436 — NOT automatic). Total = £1,000,000. Estate = £1,000,000. IHT = £0. This is the 'standard married couple' result for a £1m estate — but it requires all four thresholds to be available AND actively claimed. Two critical mistakes that destroy this: (a) the first spouse's will puts money into a discretionary NRB trust (using up the first NRB — so tNRB is reduced or zero on second death); and (b) executors fail to claim the tNRB and tRNRB because they don't know they need to (IHT402 and IHT436 are NOT automatic).
Common mistakes that cause unnecessary IHT on a £1m estate
Several common mistakes result in a £1m estate incurring IHT that could have been avoided: (1) NRB discretionary trust in older wills: many wills written before 2007 (when transferable NRBs were introduced) or before 2017 (when the RNRB was introduced) contain a 'nil rate band discretionary trust' — a clause directing the NRB amount (£325k) into a discretionary trust on the first death, with the rest to the surviving spouse. This was sensible pre-2007 to 'use up' the NRB before it was transferable. Since 2007, it is often unnecessary and harmful — it 'uses up' the first NRB so the tNRB transferred to the survivor's estate is reduced or zero. And the home in the discretionary trust means the RNRB is lost on first death. Result: a couple's combined threshold may be only £500k-£650k rather than the maximum £1m. Fix: review pre-2007 wills; consider varying the NRB trust using a deed of variation (s142 IHTA — within 2yr of first death) to redirect the NRB trust assets to the surviving spouse, restoring the 100% tNRB. (2) Failing to claim tNRB and tRNRB: both are NOT automatic. Executors must complete IHT402 (for tNRB) and IHT436 (for tRNRB) and submit these to HMRC within 2 years of the end of the tax year of the second death. Many families — particularly those acting as executors themselves without professional advice — miss these claims. Missing them on a £1m estate could mean £0 IHT becomes £200k IHT. (3) Home in a discretionary trust: even for couples, putting the home into a discretionary trust (either directly or via a 'floating NRB' clause) loses the RNRB. Every £175k of RNRB lost = £70k of unnecessary IHT. (4) Wrong beneficiary for the home: giving the home to a sibling, a friend, or a surviving partner who is not a spouse or direct descendant means no RNRB. (5) Scottish confirmation issues: if the estate includes assets in Scotland, different procedures apply and advisers may not be familiar with the cross-border interaction with the RNRB.
Reducing IHT on a £1m estate — strategies that work
If the estate is genuinely £1m and the taxpayer wants to reduce IHT, several strategies are available: (1) Ensure the will is RNRB-optimised: the most important starting point is ensuring the home passes to direct descendants (not into a discretionary trust) and the tNRB/tRNRB will be claimed. For a couple, a correctly drafted and executed will with a correctly claimed combined £1m threshold = £0 IHT. No additional planning needed. (2) Lifetime giving — PETs: gifts to individuals are potentially exempt transfers (PETs — s3A IHTA). If the donor survives 7 years from the gift, it is fully exempt. A £500k PET (e.g., giving a child £500k cash while the parent still has £500k to live on) that survives 7yr: estate = £500k; threshold = £500k (NRB + RNRB); IHT = £0. The estate needs to be manageable post-gift. (3) Annual exemption (s19 IHTA): £3,000 per year per person; two spouses = £6,000/yr of tax-free gifting. Over 10 years = £60k exempt; over 20 years = £120k exempt. Modest but certain. (4) Normal expenditure from income (s21 IHTA): gifts from surplus income are immediately exempt, uncapped, with no 7-year rule. If pension income, investment income, or rental income provides genuine surplus cash, regular gifts to children (set up as a standing order) are IHT-exempt with immediate effect. (5) Charitable legacy for 36% rate (s36 IHTA): if the single person (with RNRB available) leaves ≥10% of baseline (£500k × 10% = £50k) to charity, IHT drops from 40% to 36% on the rest. IHT = 36% × £450k = £162k — saving £38k vs 40% rate. The family's net cost of giving £50k to charity is only £12k (HMRC effectively subsidises 76% of the donation). (6) AIM BPR shares: directly held qualifying AIM shares (100% BPR — s105(1)(bb) IHTA — after 2yr; subject to April 2026 £1m combined BPR/APR cap). On a £1m estate where the combined NRB/RNRB already covers £500k: the remaining £500k chargeable portion could include £500k of AIM shares → 100% BPR → £0 IHT on those shares. IHT = £0 in total. But: AIM shares carry investment risk; ISA trap (must hold directly); April 2026 £1m cap limits 100% BPR.
The RNRB taper and why it does not affect a £1m estate
The RNRB taper (s8E IHTA 1984) reduces the RNRB by £1 for every £2 the 'adjusted net estate' exceeds £2,000,000. The adjusted net estate is calculated before BPR/APR reductions but after deducting liabilities and including trust assets (IPDI trusts). A £1m estate is well below the £2m taper threshold — the RNRB taper does NOT apply to a £1m estate. Full RNRB (£175k) and tRNRB (£175k) are available. For single people: the RNRB is fully available at all estate sizes below £2m. For couples: the combined RNRB (£175k + tRNRB £175k = £350k) is fully available if the combined estate (at the time of the second death) is below £2m — a £1m estate is well within this. The RNRB taper becomes relevant for estates approaching £2m (single) or £2.7m (couple where both RNRBs are fully tapered away at £2.35m + £2.35m individually) — but these are entirely separate concerns for higher-value estates. For £1m estates, there is no taper issue.
Frequently Asked Questions
How much inheritance tax do I pay on a £1 million estate?
It depends on who inherits and what thresholds are available. Single person, home to children: NRB (£325k) + RNRB (£175k) = £500k threshold; IHT = 40% × £500k = £200,000. Widowed person (using both spouses' thresholds): NRB £325k + tNRB £325k + RNRB £175k + tRNRB £175k = £1m combined threshold; IHT = £0 (if all four thresholds claimed and home passes to direct descendants). Married couple with £1m: first death = £0 IHT (s18 IHTA spousal exemption); second death = same as widowed person = potentially £0 IHT with all four thresholds. Key: the tNRB (IHT402) and tRNRB (IHT436) are NOT automatic — executors must claim them; missing these can turn £0 IHT into £200k IHT on a £1m estate.
Can a married couple avoid inheritance tax on a £1 million estate?
Yes — in many cases a married couple with a combined estate of up to £1m can achieve zero IHT, using the four combined thresholds. First death: everything to surviving spouse (s18 IHTA unlimited spousal exemption = £0 IHT); first spouse's NRB (£325k) and RNRB (£175k) are both preserved as transferable. Second death: the executors claim NRB £325k + tNRB £325k (IHT402 — NOT automatic) + RNRB £175k + tRNRB £175k (IHT436 — NOT automatic) = £1m combined threshold. If the estate is £1m and the home passes to direct descendants (children/grandchildren) under the will: IHT = £0. Requirements: (1) the will must direct the home to direct descendants (not a discretionary trust); (2) IHT402 and IHT436 must both be actively claimed by the executors; (3) the first spouse's NRB must have been unused at their death (not used on a discretionary NRB trust). Review your will to ensure it is structured correctly.
What is the inheritance tax-free threshold for 2026?
In 2026-27, the IHT-free threshold (the amount below which no IHT is payable) depends on the circumstances: (1) Single person: £325,000 NRB only (if no RNRB available); OR £500,000 (NRB £325k + RNRB £175k) if a qualifying home passes to direct descendants. (2) Widowed person using transferred thresholds from a deceased spouse: up to £1,000,000 (NRB £325k + tNRB £325k + RNRB £175k + tRNRB £175k) if all four thresholds are available and claimed, and the home passes to direct descendants. These thresholds are frozen to at least 2030 under the Finance Act 2026 freeze. RNRB taper: if the estate exceeds £2m, the RNRB is reduced by £1 per £2 of excess (so a £2.35m single estate loses the RNRB entirely). IHT is charged at 40% on the portion above the threshold (or 36% if ≥10% of the baseline goes to charity — s36 IHTA).
Can I reduce IHT on a £1 million estate?
Yes — several strategies can reduce or eliminate IHT on a £1m estate: (1) Will structure: ensure the home passes to direct descendants (not a discretionary trust) to preserve the RNRB (£175k); for couples, ensure the first death's NRB and RNRB are preserved for transfer to the surviving spouse (avoid NRB discretionary trusts in older wills). (2) tNRB and tRNRB: claim the transferred thresholds from a deceased spouse (IHT402 and IHT436 — NOT automatic). These alone can bring a £1m estate to £0 IHT for a widowed person or a surviving spouse's second death. (3) Charitable legacy (s36 IHTA): leaving ≥10% of the baseline to charity reduces the IHT rate from 40% to 36% — saving approximately £38k on a £1m estate with RNRB. (4) Lifetime gifting: gifts to individuals are PETs (s3A IHTA — 7yr clock); gifts from surplus income are immediately exempt (s21 IHTA — uncapped). (5) AIM BPR shares: directly held qualifying AIM shares for 2yr+ = 100% BPR (subject to April 2026 £1m combined BPR/APR cap) — can reduce the chargeable estate significantly.
Is the RNRB available on a £1 million estate?
Yes — the RNRB (s8D IHTA 1984 — £175k per person) is fully available on a £1m estate because the RNRB taper only applies when the estate exceeds £2,000,000. A £1m estate is well below this threshold — no taper; full RNRB available. The RNRB is available if the qualifying residential interest (a home the deceased owned and lived in at some point) passes to direct descendants (children, grandchildren, step-children — s8K IHTA). The RNRB must be claimed via IHT435 — it is NOT automatic, even for non-excepted estates. For a widowed person: the transferred RNRB (tRNRB — s8G IHTA) from a deceased first spouse (IHT436 — NOT automatic) can add a further £175k, giving a combined RNRB of £350k on the second death.
The Difference Between £0 and £200k IHT Is Often in the Will
For most families with a £1m estate, the right will structure — directing the home to direct descendants and enabling the tNRB and tRNRB to be claimed — can mean zero IHT. WillSafe will kits from £39.99.
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