UK Inheritance Tax is charged on the value of an estate above the tax-free bands. This calculator applies the 2025/26 nil-rate and residence bands, the 40% rate, and the reduced 36% charity rate.
How it works
Every estate has a £325,000 nil-rate band. When a main home passes to direct descendants, an additional residence nil-rate band of £175,000 applies. The residence band is tapered away by £1 for every £2 the estate exceeds £2,000,000, disappearing at £2,350,000.
The estate above the combined bands is taxed at 40%. If at least 10% of the net estate (after the nil-rate band) is left to charity, the rate on the taxable estate falls to 36%, and the charity gift itself is exempt.
tax-free = £325,000 + residence band (after taper)
taxable = estate − charity gifts − tax-free
IHT = taxable × 40% (or 36% if 10%+ to charity)Example
A £700,000 estate that includes a home left to children gets £325,000 + £175,000 = £500,000 tax-free. The taxable amount is £200,000, taxed at 40% = £80,000 of Inheritance Tax, leaving £620,000 for the heirs.
Notes
Estimate only, not financial or legal advice. Models 2025/26 IHT with the £325,000 nil-rate band, the £175,000 residence band (tapered above a £2,000,000 estate), the 40% rate, and the 36% reduced charity rate. Transferable bands between spouses, the 7-year rule on lifetime gifts, business and agricultural relief, and trusts are not included. Verify at gov.uk.