How Much Inheritance Tax Will I Pay UK? Worked Examples for Every Estate Size (2026)
Inheritance tax in the UK is 40% on everything above your tax-free threshold. The threshold is £325,000 (NRB) per person, rising to £500,000 if you own a home and leave it to children, or up to £1,000,000 for a married couple. Below are worked examples for every common estate size from £300,000 to £2,000,000.
| Estate Value | Situation | IHT Bill | Threshold Used | Note |
|---|---|---|---|---|
| £300,000 | Single, home to children, under NRB | £0 | £325,000 NRB | Estate below NRB, no IHT |
| £400,000 | Single, no home (or not to descendants) | £30,000 | £325,000 NRB only | £75k taxable × 40% |
| £500,000 | Single, home to children | £0 | £500,000 (NRB + RNRB) | NRB £325k + RNRB £175k = exact threshold |
| £600,000 | Single, home to children | £40,000 | £500,000 (NRB + RNRB) | £100k taxable × 40% |
| £700,000 | Single, home to children | £80,000 | £500,000 (NRB + RNRB) | £200k taxable × 40% |
| £800,000 | Single, home to children | £120,000 | £500,000 (NRB + RNRB) | £300k taxable × 40% |
| £1,000,000 | Single, home to children | £200,000 | £500,000 (NRB + RNRB) | £500k taxable × 40% |
| £1,000,000 | Couple, 2nd death, home to children | £0 | £1,000,000 (combined NRBs + RNRBs) | Combined £650k NRB + £350k RNRB = £1m |
| £1,500,000 | Couple, 2nd death, home to children | £200,000 | £1,000,000 (combined) | £500k taxable × 40% |
| £2,000,000 | Couple, 2nd death, home to children | £400,000 | £1,000,000 (combined) | £1m taxable × 40% |
2026/27 figures. NRB £325,000; RNRB £175,000 (home to direct descendants only). IHT at 40% on taxable estate. RNRB tapers for estates above £2m. These are illustrative, actual figures depend on the specific estate, liabilities, reliefs, and prior gifts.
How the IHT Calculation Works
The IHT calculation formula, step by step
The IHT calculation at death follows these steps: (1) Add up the gross estate: everything owned at open market value, property (net of mortgage), bank accounts, savings, ISAs, investments, personal possessions, business interests (at market value, before BPR), farm assets (before APR), and the deceased's share of jointly-owned assets (tenants in common only, joint tenants' share passes outside the estate); (2) Add failed PETs: gifts to individuals made in the 7 years before death that are above the available exemptions, these are 'failed PETs' and are added back into the estate for NRB purposes; (3) Deduct liabilities: mortgages, debts, funeral costs (s172 IHTA 1984); (4) Deduct exemptions: spousal/civil partner transfer (s18 IHTA, fully exempt); charitable legacies (s23); (5) Apply BPR and APR: reduce the qualifying business/agricultural assets by 100% or 50% (after April 2026 cap); (6) Apply the NRB: £325,000 (reduced by CLTs in the 7 years before death); (7) Apply the RNRB: £175,000 if the main home passes to direct descendants; (8) Apply any transferred NRB and RNRB from a deceased spouse; (9) The remaining taxable estate × 40% (or 36% if 10%+ goes to charity, s36 IHTA 1984).
What increases your IHT bill?
Several factors can push the IHT bill higher than the basic calculation suggests: (1) Failed PETs added back: gifts to individuals in the 7 years before death are Potentially Exempt Transfers. If death occurs within 7 years, the gift is a 'failed PET', it is added back to the estate and set against the NRB. If the NRB is used up by failed PETs, the estate pays IHT at 40% from the first pound. Example: £200,000 gifted to children 4 years before death, failed PET uses £200,000 of the NRB; only £125,000 NRB remains at death; (2) CLTs within 7 years using the NRB: Chargeable Lifetime Transfers (gifts to trusts) use the NRB on the date they are made; if made within 7 years before death, they use the NRB available at death. A £300,000 gift to a discretionary trust 5 years ago uses almost all of the £325,000 NRB, leaving only £25,000 NRB available at death; (3) Gifts with reservation (s102 FA1986): a gifted asset where the donor continues to benefit is treated as still in the estate (the gift never happened for IHT); (4) Undervaluation: HMRC can challenge asset valuations on death; property and business interests should be professionally valued; (5) Pensions from April 2027: from 6 April 2027, pension funds enter the IHT estate, this will significantly increase the IHT bill for estates with large defined-contribution pensions.
What reduces your IHT bill?
Multiple reliefs, exemptions, and strategies can reduce the IHT bill: (1) RNRB: directing the home to children saves up to £70,000 in IHT (£175,000 × 40%), this is the biggest single IHT-saving decision for most families and is determined entirely by the will; (2) BPR: qualifying business assets (AIM shares, trading companies, sole trader businesses) reduce the chargeable estate, 100% BPR on qualifying assets means £0 IHT on those assets (up to £1m combined BPR/APR cap from April 2026); (3) APR: qualifying agricultural property (farms, agricultural land) reduces the chargeable estate at 100% or 50%; (4) 10%+ charitable legacy: reduces the taxable estate (charity is exempt) AND reduces the IHT rate from 40% to 36% on the remainder; (5) Lifetime PETs: gifts to individuals made more than 7 years before death are entirely outside the estate; (6) Annual exemption (£3,000/yr): immediately outside the estate; (7) Normal expenditure from income (s21 IHTA, uncapped): gifts from surplus income; (8) Loss on sale reliefs: if assets are sold within 4 years of death at a loss below the probate value, shares (s179 IHTA) and land (s191 IHTA), an IHT refund may be claimed; (9) Deed of variation (s142 IHTA): within 2 years of death, redirect assets to charity or direct descendants.
When is no IHT payable?
IHT is £0 in these situations: (1) Estate below the NRB: the whole estate is worth less than £325,000, no IHT regardless of who inherits; (2) Everything passes to the surviving spouse: the spousal exemption (s18 IHTA 1984) makes any amount passing to a surviving spouse or civil partner IHT-exempt on the first death. On the second death, the combined NRB and RNRB (up to £1,000,000) may bring the estate below the threshold; (3) Estate below £500,000 with RNRB: a single person with a home worth any value, where the total estate is below £500,000 and the home passes to children; (4) Couple with estate below £1,000,000: a married couple on the second death where the combined transferred NRBs (£650,000) and transferred RNRBs (£350,000) cover the whole estate and the will directs the home to children; (5) Full BPR: a business estate where all assets qualify for 100% BPR, the whole estate is BPR-exempt (up to £1m cap from April 2026); (6) Full APR: a farming estate where all assets qualify for 100% APR (up to £1m cap from April 2026).
Frequently Asked Questions
How much inheritance tax will I pay in the UK?
IHT is 40% on the taxable estate (everything above the threshold). The threshold depends on your circumstances: single person, home to children: £500,000 (NRB £325,000 + RNRB £175,000). Single person, no home or home not to descendants: £325,000. Married couple, second death, home to children: up to £1,000,000. Everything above the threshold is taxed at 40%, or 36% if 10%+ of the estate passes to charity. Example: £700,000 estate, single, home to children, taxable estate £200,000 (£700k − £500k threshold). IHT: £80,000.
How much inheritance tax on a £500,000 estate?
It depends on whether the RNRB applies: if you are single, own a home, and leave the home to children: threshold is £500,000, IHT = £0. If you are single but do not own a home (or leave the home to someone other than direct descendants): threshold is £325,000, taxable estate £175,000, IHT £70,000. If you are married and this is the first death (everything to spouse): IHT = £0 (spousal exemption), and the unused NRB and RNRB transfer to the survivor.
How much inheritance tax on a £700,000 estate?
Single person, home to children: threshold £500,000, taxable estate £200,000, IHT £80,000 (£200,000 × 40%). Single, no RNRB (home not to descendants): threshold £325,000, taxable estate £375,000, IHT £150,000. Married couple, second death, home to children, combined transferred NRB + RNRB = £1,000,000: IHT £0 (estate below the couple's combined threshold).
How much inheritance tax on a £1,000,000 estate?
Single person, home to children: threshold £500,000, taxable estate £500,000, IHT £200,000. With AIM BPR portfolio (£200,000 qualifying): taxable estate £300,000, IHT £120,000. With 10% to charity: charitable legacy £50,000 (10% of £500k net estate), 36% rate applies, IHT approximately £108,000. Married couple, second death, home to children: if combined estate is exactly £1,000,000 and both NRBs and RNRBs transfer, IHT £0. If the estate just exceeds £1m: IHT at 40% on the excess.
What is the inheritance tax rate in the UK for 2026?
The standard IHT rate is 40% on the taxable estate (everything above the NRB £325,000 and RNRB £175,000 thresholds). The reduced rate is 36% where 10% or more of the net estate passes to charity (s36 IHTA 1984 / Finance Act 2012). On lifetime gifts to trusts (CLTs): 20% lifetime rate (50% of the death rate). Both the 40% and 36% rates have been unchanged since 2010.
Reduce Your IHT Bill, Start With Your Will
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