Inheritance tax (UK) calculator

What the Inheritance Tax (UK) Calculator Does

This is the home of the Inheritance Tax (UK) calculator, plus everything around it: a plain-English explanation of Inheritance Tax (UK), input-by-input guidance, the formula revealed, and a step-by-step worked example with real numbers. Inheritance tax is the 40% levy that can take a huge slice of an estate, and an inheritance tax (UK) calculator shows exactly how the nil-rate bands shield — or fail to shield — what you leave behind.

You may also need our Dividend Tax (UK) calculator, Tip calculator, Pay Raise calculator — they cover the neighbouring calculations people usually run alongside Inheritance Tax (UK).

How to Use This Calculator

Enter your figures into the fields below. Inheritance tax (IHT) is charged at 40% on the value of a UK estate above the available tax-free allowances.

• Total estate value: Everything owned at death: property, savings, investments, possessions, minus debts.
• Home value and beneficiary: Whether a residence passes to direct descendants, unlocking the residence band.
• Marital status: Spouses can double up unused nil-rate bands.
• Lifetime gifts: Significant gifts in the last seven years, which may use up the nil-rate band.
• Charitable legacies: Gifts of 10%+ of the net estate reduce the rate to 36%.

The result appears instantly, with a breakdown of each step. If a figure looks unexpected, double-check your units first — metric versus imperial mix-ups are the most common cause of surprising results.

The Inheritance Tax (UK) Formula

The calculator applies this standard formula:

Taxable estate = Estate value − Nil-rate band (£325,000) − Residence band (£175,000, if eligible)
IHT = Taxable estate × 40%  (or 36% with 10%+ to charity)

• Nil-rate band: £325,000 per person; transferable between spouses.
• Residence band: £175,000, only when a home goes to direct descendants.
• Taxable estate: Whatever is left above the bands — taxed at 40%.

A couple can effectively shelter £1 million (£325k + £175k each) when a home passes to their children.

Worked Example

Here is the method applied to realistic figures:

1. Value the estate at £700,000, including a £300,000 family home left to two children.
2. Subtract the nil-rate band: £700,000 − £325,000 = £375,000.
3. Subtract the residence band (home to direct descendants): £375,000 − £175,000 = £200,000 taxable.
4. Apply 40%: £200,000 × 0.40 = £80,000 inheritance tax due.

Frequently Asked Questions

How much can I leave tax-free in the UK?

£325,000 per person under the nil-rate band, plus £175,000 of residence nil-rate band when a home passes to direct descendants — £500,000 in total. Married couples and civil partners can combine unused allowances to shelter up to £1 million.

What is the seven-year rule for gifts?

Gifts made more than seven years before death are generally exempt. Gifts made within seven years may be added back, with taper relief reducing the tax on gifts made three to seven years before death. Regular gifts out of surplus income are immediately exempt.

Do spouses pay inheritance tax?

Transfers between UK-domiciled spouses and civil partners are fully exempt, and any unused nil-rate band transfers to the survivor. Tax typically bites on the second death, which is why couples plan jointly.

How does the 36% rate work?

If you leave at least 10% of your net estate to charity, the IHT rate on the taxable portion drops from 40% to 36%. On large estates the saving can exceed the value of the charitable gift itself.

Are pensions subject to inheritance tax?

Most defined-contribution pensions sit outside the estate for IHT and can pass to beneficiaries, though income tax may apply depending on the age at death. This makes pensions one of the most IHT-efficient assets to preserve.

Finally, remember that Inheritance Tax (UK) is one instrument on the dashboard, not the whole dashboard. The related guides below connect it to the neighbouring calculations that complete the picture. Readers who follow those links consistently report the same thing: each individual figure makes more sense once you see how they fit together.

It is also worth stressing what Inheritance Tax (UK) cannot do. No calculator captures every nuance of a real situation — unusual circumstances, edge cases and judgement calls still need a human. Use the figure as a strong, evidence-based starting point, and apply common sense (or professional advice) for the last mile. That balance is the mark of someone who uses tools well.

Bookmark this page alongside the calculator itself. Most readers return to Inheritance Tax (UK) calculations at decision points — a change in income, a new goal, an annual review — and having both the tool and the explanation one click away turns each revisit into a thirty-second task instead of a research project.

A useful habit is re-running the Inheritance Tax (UK) calculation whenever your circumstances change — new figures in, fresh answer out. Stale numbers are one of the quietest sources of bad decisions: the maths was right once, but the world moved on. A quick recalculation takes seconds and keeps every downstream decision honest.

If your result surprised you, treat the surprise as information rather than error. Unexpected Inheritance Tax (UK) figures usually point at an input you have been estimating optimistically, a rule you did not know applied, or a genuine change worth investigating. Dig into the breakdown the calculator provides — the ‘why’ is almost always sitting in one specific line.

Consistency beats precision in tracking. Measuring Inheritance Tax (UK) the same way, under the same conditions, on a regular schedule produces trends you can trust — even if any single reading carries a little noise. Pick a routine (monthly, quarterly, whatever fits) and stick to it; the pattern that emerges over time is the real insight.

When the stakes are high — a major financial decision, a medical conversation, a legal or contractual matter — pair the calculator’s output with qualified professional advice. The tool gives you speed and a solid working figure; the professional gives you judgement for your specific situation. Bring your inputs and the result to that conversation and it will be twice as productive.