How Inheritance Tax works (2026/27)
Inheritance Tax is a tax on the estate — the property, money and possessions — of someone who has died. The standard rate is 40%, but it is only charged on the part of the estate above the tax-free threshold. Most estates pay nothing because they fall below the threshold, or because everything is left to a spouse or civil partner.
The nil-rate band (£325,000)
Every estate gets a nil-rate band of £325,000 that is taxed at 0%. Only the value above it is potentially taxable at 40%.
The residence nil-rate band (up to £175,000)
If you leave your main home to your children or grandchildren (direct descendants), you get an extra residence nil-rate band of up to £175,000. Combined with the standard band, this can lift an individual's threshold to £500,000. It tapers away by £1 for every £2 an estate is worth over £2 million.
Spouses and civil partners
Anything you leave to a spouse or civil partner is exempt from Inheritance Tax. In addition, any unused nil-rate band and residence nil-rate band transfers to them. That is why a surviving spouse can often pass on up to £1 million tax-free (£325,000 + £175,000, doubled).
Charity gifts
If you leave 10% or more of the net estate to charity, the Inheritance Tax rate on the rest drops from 40% to 36%.
| Allowance | 2026/27 |
|---|---|
| Nil-rate band (per person) | £325,000 |
| Residence nil-rate band (per person) | Up to £175,000 |
| Standard IHT rate | 40% |
| Reduced rate (10%+ to charity) | 36% |
Frequently asked questions
Do I pay Inheritance Tax on money left to my husband or wife?
No. Transfers between spouses and civil partners are completely exempt, no matter the amount, and their unused allowances pass to the survivor.
How can a couple pass on £1 million tax-free?
Each person has a £325,000 nil-rate band plus up to £175,000 residence nil-rate band. When the first partner dies leaving everything to the other, both allowances transfer — so the survivor's estate can use £650,000 + £350,000 = £1 million, provided the home goes to children or grandchildren.
What are the 7-year rules on gifts?
Gifts you make can become taxable if you die within 7 years. Between 3 and 7 years, "taper relief" can reduce the tax. This calculator does not model lifetime gifts — it estimates tax on the estate at death.
Who pays the tax?
Inheritance Tax is usually paid from the estate by the executor before the money is distributed, not by the individual beneficiaries.
More United Kingdom calculators
This calculator provides a simplified estimate for the 2026/27 tax year based on published HMRC rules and is for general information only — it is not financial, tax or legal advice. It does not account for lifetime gifts, trusts, business/agricultural relief, pensions or other reliefs. For your exact position, see GOV.UK or speak to a qualified adviser. Source: GOV.UK (Inheritance Tax).