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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