How it works

Inheritance Tax is charged on the value of your estate above your tax-free allowances. We add up your allowances, subtract them from the estate, and apply the rate.

1. Nil-rate band

Everyone has a £325,000 nil-rate band, frozen until April 2031.

2. Residence nil-rate band

An extra £175,000 applies when your main home passes to direct descendants. It reduces by £1 for every £2 your estate exceeds £2 million, reaching zero at £2.35m.

3. Spouse transfer

A surviving spouse or civil partner inherits the unused bands, so a couple can shield up to £1 million with a home left to descendants.

4. The rate

40% applies to the taxable estate — reduced to 36% where at least 10% is left to charity. From April 2027, unused pensions are expected to fall within the estate.

A free, independent educational tool for UK Inheritance Tax (2026/27). It does not model lifetime gifts, trusts, business or agricultural relief, or detailed pension rules. It is not tax or legal advice — check GOV.UK or a qualified adviser.

Sources: GOV.UK — Inheritance Tax · GOV.UK — Passing on a home (RNRB) · House of Commons Library — Inheritance Tax