Inheritance Tax Calculator

Add up everything the estate owns (property, savings, investments, possessions) and take off any debts. Subtract the available allowances — the £325,000 nil-rate band, plus the £175,000 residence band if the main home passes to direct descendants, plus any nil-rate bands transferred from a late spouse. Inheritance Tax is then 40% of whatever is left — or a reduced 36% if at least 10% of the ‘baseline amount’ (broadly, the estate above the nil-rate bands) is left to charity. Enter your figures above for an estimate of the liability.

Everyone has a £325,000 nil-rate band. If you pass your main home to children or grandchildren you also get the £175,000 residence nil-rate band — up to £500,000 in total. A surviving spouse or civil partner can inherit the unused bands of the partner who died, so a couple can pass on up to £1 million tax-free.

Inheritance Tax is charged at 40% on the value of the estate above the available nil-rate bands. If you leave at least 10% of the ‘baseline amount’ — broadly, that taxable value above the nil-rate bands — to charity, the rate on the rest drops to 36%. The exact baseline test is more involved, so treat the 36% as an estimate.

A house is part of the estate like any other asset. But passing your main residence to direct descendants unlocks the £175,000 residence nil-rate band, which can shield much of its value. The residence band tapers away by £1 for every £2 the estate is worth over £2 million.

No. Anything you leave to your spouse or civil partner is completely free of Inheritance Tax, however much it is. On top of that, they inherit your unused nil-rate bands, which is why couples can pass on up to £1 million between them.

Common ways include leaving assets to a spouse or to charity, giving gifts more than seven years before death (they then fall outside the estate), using your annual gift allowances, and pension planning. The rules are complex and easy to get wrong — take advice from a solicitor or estate planner for anything significant.