UK Inheritance Tax (IHT) Calculator
Total Gross Estate:
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Total Exemptions Applied:
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Taxable Amount:
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Estimated IHT Due:
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How to Calculate Inheritance Tax (IHT)
Inheritance Tax is a tax on the estate (the property, money, and possessions) of someone who has passed away. In the UK, the standard Inheritance Tax rate is 40%, and it's only charged on the part of your estate that's above the threshold.
Key Thresholds and Allowances
- Nil Rate Band (NRB): The basic threshold is £325,000. If your estate is valued below this, there is normally no IHT to pay.
- Residence Nil Rate Band (RNRB): An additional allowance (up to £175,000) if you leave your main residence to direct descendants (children or grandchildren).
- The 7-Year Rule: Any gifts made more than seven years before death are usually exempt. Gifts made within seven years may be subject to "taper relief."
- Charitable Giving: If you leave at least 10% of your "baseline estate" to charity, the IHT rate on the remaining taxable estate may be reduced from 40% to 36%.
Example Calculation
Imagine an estate valued at £900,000, including a family home worth £400,000 left to children. If we apply the standard £325,000 NRB and the £175,000 RNRB, the total tax-free threshold is £500,000. The taxable portion is £400,000 (£900k – £500k). At a 40% tax rate, the total IHT due would be £160,000.
Ways to Reduce Your IHT Bill
Planning ahead is essential for minimizing tax liability. Common strategies include making use of annual gift allowances (£3,000 per year), setting up trusts, or making life insurance payments into a trust so they fall outside the estate for tax purposes.