Inheritance Tax on a £400,000 Estate UK: Do You Pay IHT? (2026 Worked Examples)
A single person with a £400,000 estate pays either £0 or £30,000 in inheritance tax — the RNRB is the deciding factor. With the home passing to children: combined threshold £500,000; the £400,000 estate is below the threshold; IHT = £0. Without the RNRB: threshold £325,000; IHT on £75,000 = £30,000. For a married couple, it is almost certainly £0.
| Scenario | NRB | RNRB | Threshold | Taxable | IHT Due |
|---|---|---|---|---|---|
| Single person — home passes to children (RNRB applies) | £325,000 | £175,000 | £500,000 | £0 (below threshold) | £0 |
| Single person — no RNRB (no home, or home not to direct descendants) | £325,000 | None | £325,000 | £75,000 | £30,000 |
| Single person — home to children + 10% charity legacy | £325,000 | £175,000 | £500,000 | £0 (below threshold) | £0 |
| Married couple — first leaves everything to spouse; second death | £650,000 (both NRBs) | Not needed | £650,000 | £0 (below threshold) | £0 |
| Single — failed PET £100k (e.g. 4yr ago), no RNRB | £225,000 (residual) | None | £225,000 | £175,000 | £70,000 |
| Single — failed PET £100k (4yr ago), home to children (RNRB applies) | £225,000 (residual) | £175,000 | £400,000 | £0 (just at threshold) | £0 |
| Single — estate £400k, home £300k in discretionary trust (RNRB LOST) | £325,000 | LOST — home in discretionary trust | £325,000 | £75,000 | £30,000 |
2026/27. NRB: £325,000 (frozen to 2030). RNRB: £175,000 (frozen to 2030). RNRB requires main home to pass directly to direct descendants (children, grandchildren) — NOT to a discretionary trust. Transferred NRB (s8A IHTA): claim IHT402 on second death. RNRB LOST if home in discretionary trust. Failed PETs (s3A IHTA): reduce available NRB in chronological order (oldest PET first). IHT rate: 40% on taxable estate (36% if 10%+ to charity — s36 IHTA).
£400,000 Estate IHT: Detailed Analysis
The RNRB is the difference between £0 and £30,000 IHT on a £400,000 estate
A £400,000 estate sits in a zone where the Residence Nil-Rate Band (RNRB — s8D IHTA 1984) is the single deciding factor between paying IHT or paying nothing. With the RNRB: NRB £325,000 + RNRB £175,000 = £500,000 combined threshold. The estate of £400,000 is £100,000 below the combined threshold — IHT = £0. Without the RNRB: only the NRB of £325,000 applies. Taxable estate = £400,000 − £325,000 = £75,000. IHT at 40% = £30,000. The RNRB applies only where: (1) the deceased owned a qualifying residential property (their main home or a former main home) that is included in the estate; and (2) that property passes to direct descendants — children, stepchildren, adopted children, or grandchildren. If the property passes to a spouse: no RNRB on first death (but the RNRB transfers — s8G IHTA 1984 — to the survivor for the second death). If the property passes to a discretionary trust: the RNRB is LOST. If the property passes to a sibling, friend, or charity: the RNRB is LOST. The RNRB is claimed automatically when the conditions are met — there is no election required, but the IHT400 and IHT435 schedule must reflect the RNRB claim.
Married couple with a £400,000 estate — almost certainly £0 IHT
A married couple (or civil partners) with a £400,000 estate face almost no risk of IHT, regardless of whether the RNRB applies. Assuming the first to die leaves everything to the surviving spouse: (1) First death: £0 IHT — the spousal exemption (s18 IHTA 1984) exempts all transfers between spouses; (2) Second death: the survivor has their own NRB (£325,000) plus the transferred NRB from the first death (s8A IHTA 1984, claim IHT402) = £650,000 combined NRB. An estate of £400,000 is £250,000 below the £650,000 NRB threshold — IHT = £0, with money to spare. Even if the transferable NRB is only partially used (for example, if the first spouse left some assets to children directly), the combined NRB on the second death will almost certainly still exceed £400,000 in most scenarios. The RNRB: with home to children on the second death, combined threshold rises to £1,000,000 — even further beyond the £400,000 estate. Key point: for a married couple with a £400,000 estate, structuring the will correctly (first spouse leaves everything to the survivor) is virtually all that is needed to ensure £0 IHT.
How failed gifts (PETs) can cause IHT on a £400,000 estate
The most common way a £400,000 estate unexpectedly faces IHT is through failed Potentially Exempt Transfers (PETs — s3A IHTA 1984): gifts made within 7 years of death. Failed PETs reduce the available NRB (the NRB is applied against gifts in chronological order — s7 and s8 IHTA; a PET that fails uses NRB from the oldest gifts first). Example 1: single person, no RNRB, gave £100,000 to a child 4 years before death. Failed PET of £100,000 uses £100,000 of the NRB. Residual NRB: £325,000 − £100,000 = £225,000. Taxable estate: £400,000 − £225,000 = £175,000. IHT at 40% = £70,000. Example 2: same scenario but the home passes to children (RNRB applies). Residual NRB: £225,000. RNRB: £175,000. Combined threshold: £400,000. Taxable estate: £400,000 − £400,000 = £0. IHT = £0 — just at the threshold. This illustrates the compounding importance of: (a) keeping records of all gifts in the 7 years before death (IHT403 — gifts and other transfers of value); and (b) ensuring the will directs the home to children (triggers RNRB to offset failed PET impact). Taper relief: if the £100,000 PET was given in years 4-5 before death, the IHT on the PET itself (above the NRB) tapers — but since the PET was within the NRB at the date of gift (£100,000 < £325,000), taper does not reduce the estate IHT — only the estate's IHT is at 40%.
Home in a discretionary trust — losing the RNRB on a £400,000 estate
A common mistake in older wills is directing the home into a discretionary trust rather than to children directly. This loses the RNRB — converting a £0 IHT outcome into a £30,000 IHT liability on a £400,000 estate. Scenario: single person, £400,000 estate, home worth £300,000. Will directs home into a discretionary trust (for children as potential beneficiaries). IHT result: the RNRB does NOT apply (home is in a discretionary trust, not passing directly to direct descendants). Only the NRB of £325,000 applies. Taxable estate = £400,000 − £325,000 = £75,000. IHT = £30,000. Alternative: home passes directly to children in the will. RNRB applies. Combined threshold = £500,000. £400,000 < £500,000. IHT = £0. The discretionary trust approach was popular before the RNRB was introduced in 2017 (it was used to secure the 'NRB trust' technique). Since 2017, for estates where the main home is the primary asset, directing the home to children directly is almost always more IHT-efficient than a discretionary trust. The old NRB discretionary trust technique loses up to £70,000 in RNRB value for a single person, and up to £140,000 for a married couple. Anyone with an older will containing an NRB discretionary trust should urgently review whether it costs them the RNRB.
Frequently Asked Questions
Do you pay inheritance tax on a £400,000 estate in the UK?
It depends on the RNRB. Single person, home passes to children: NRB £325,000 + RNRB £175,000 = £500,000 threshold. £400,000 is below the threshold — IHT = £0. Single person, no RNRB (no home or home not to direct descendants): NRB £325,000 only. Taxable = £75,000. IHT = £30,000 at 40%. Married couple (first leaves everything to spouse): combined NRB £650,000. £400,000 well below threshold — IHT = £0. The RNRB is the difference between £0 and £30,000 IHT for a single person with a £400,000 estate.
How do I avoid inheritance tax on a £400,000 estate?
For a single person with a £400,000 estate: (1) Make sure the will leaves the main home directly to children or grandchildren — this triggers the RNRB (£175,000), raising the threshold to £500,000. Your £400,000 estate is below the £500,000 threshold: IHT = £0; (2) Avoid holding the home in a discretionary trust — this loses the RNRB and causes £30,000 IHT; (3) Make lifetime gifts where possible (annual exemption £3,000/yr, normal expenditure from income — uncapped); (4) Keep records of all gifts in the last 7 years (IHT403) — failed PETs reduce the NRB and can create IHT. For a married couple: structuring the will so the first spouse leaves everything to the survivor (using the spousal exemption) and then claiming the transferred NRB on second death (IHT402) gives a combined NRB of £650,000 — well above £400,000 = £0 IHT.
What is the inheritance tax on a £400,000 estate with no home?
If there is no residential property in the estate (or the home does not pass to direct descendants), the RNRB does not apply. Only the NRB of £325,000 is available. Taxable estate = £400,000 − £325,000 = £75,000. IHT at 40% = £30,000. Options to reduce this: (1) annual gifts (£3,000/yr removes assets over time); (2) normal expenditure from income (s21 IHTA — immediately exempt, uncapped); (3) charitable legacy (10% of estate → IHT rate drops to 36%; but where estate = £400k and NRB = £325k, taxable = £75k; charity = £7,500 [10% of £75k net estate]; IHT at 36% on remaining £67,500 = £24,300 vs £30,000 without charity).
What happens if a £400,000 estate has gifts in the last 7 years?
Gifts to individuals (PETs — s3A IHTA 1984) made within 7 years of death are added back to the estate for IHT calculation purposes. They use up the NRB in chronological order (oldest first). Example: £100,000 PET 4 years before death. Residual NRB = £325,000 − £100,000 = £225,000. Without RNRB: taxable estate = £400,000 − £225,000 = £175,000. IHT = £70,000 (more than double the no-PET outcome). With RNRB (home to children): threshold = £225,000 + £175,000 = £400,000 = exactly the estate value. IHT = £0. Taper relief on the PET: reduces IHT attributable to the PET above the NRB — but since the £100k PET was within the NRB at the date of gift, no IHT falls directly on the PET. All the IHT falls on the estate.
Does a discretionary trust in the will cost IHT on a £400,000 estate?
Yes — if the main home (the key asset for the RNRB) passes into a discretionary trust under the will, the RNRB is lost. On a £400,000 estate with the home in a discretionary trust: only the NRB £325,000 applies. Taxable = £75,000. IHT = £30,000 — compared to £0 if the home had passed directly to children. Many older wills contain NRB discretionary trust provisions that predate the RNRB (introduced 2017). Those wills should be urgently reviewed — a simple change to direct the home to children (with a letter of wishes to the trustees for flexible distribution) saves up to £70,000 in IHT for a single person.
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