inheritance tax calculator uk

How this inheritance tax calculator UK works

This calculator gives a practical estimate of UK inheritance tax by applying core allowances used in estate planning. It starts with your gross estate, subtracts debts, then applies available nil-rate bands. If relevant, it also applies the residence nil-rate band and checks whether charitable giving could reduce the tax rate from 40% to 36%.

It is designed for quick scenario planning. For example, you can compare how much difference it makes if a spouse’s unused allowance is transferred, or how leaving part of the estate to charity could alter the final tax bill.

Key UK IHT thresholds used in this tool

• Nil-Rate Band (NRB): £325,000 per person
• Residence Nil-Rate Band (RNRB): up to £175,000 per person
• RNRB taper: reduced for estates above £2 million
• Standard IHT rate: 40%
• Reduced IHT rate: 36% where charitable giving qualifies

Step-by-step: what to enter

1) Gross estate value

Include property, savings, investments, business interests, life policies payable into the estate, valuable possessions, and other relevant assets.

2) Debts and liabilities

Include mortgage balances, loans, credit commitments, and expected estate liabilities where appropriate.

3) Gifts made in the previous seven years

Potentially chargeable gifts can affect how much nil-rate band remains available on death. This calculator uses a simplified approach by reducing available NRB by the amount entered.

4) Residence passing to direct descendants

The residence nil-rate band generally applies when a qualifying residential interest passes to children, stepchildren, adopted children, foster children, or further lineal descendants.

5) Charity amount

Gifts to qualifying charities are usually exempt from IHT. If the amount is large enough, the tax rate on the taxable portion of the estate may reduce to 36%.

Worked example

Suppose an estate is worth £900,000 with £40,000 liabilities. Net estate is £860,000. Assume no chargeable gifts, a home worth £250,000 passing to children, and no transferred spouse allowances.

• NRB: £325,000
• RNRB: up to £175,000 (capped by qualifying home value and taper rules)
• Total relief before charity: £500,000
• Taxable estate: about £360,000
• Estimated IHT at 40%: about £144,000

If part of that taxable estate is left to charity and qualifies for the reduced rate, the final tax amount can drop further.

Ways families often reduce inheritance tax legally

• Use annual gift allowances and regular gifting out of surplus income.
• Make use of spouse/civil partner exemptions and transferable allowances.
• Review wills to ensure residence nil-rate band eligibility where possible.
• Consider charitable legacies if aligned with family goals.
• Explore trusts and specialist reliefs with professional guidance.

Common mistakes to avoid

• Assuming all gifts are automatically outside the estate.
• Forgetting life assurance payout structure (in trust vs in estate).
• Ignoring the £2 million taper effect on residence nil-rate band.
• Using outdated property or investment values.
• Not updating wills after marriage, divorce, or births.

Final note

An inheritance tax calculator UK is best used as a planning tool, not as a final probate figure. Still, even a quick estimate can help families make better decisions now—before avoidable tax costs are locked in. If your estate includes trusts, business assets, farmland, foreign property, or complex gifting, get tailored advice.