Inheritance Tax due £40,000. Tax-free allowance £500,000.
A net estate of £600,000 leaves £100,000 above the £500,000 allowance, taxed at 40% — an Inheritance Tax bill of £40,000.
How the allowance is built
| Nil-rate band | £325,000 |
| Residence nil-rate band | £175,000 |
| Total tax-free allowance | £500,000 |
The £325,000 nil-rate band and £175,000 residence nil-rate band are frozen until April 2030. The residence band only applies when a home passes to direct descendants, and tapers away above a £2,000,000 estate. Anything you leave to a spouse or civil partner is Inheritance Tax-free.
Frequently asked questions
How much can you inherit before paying Inheritance Tax?
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.
What is the Inheritance Tax rate?
Inheritance Tax is charged at 40% on the value of the estate above the available nil-rate bands. If you leave 10% or more of the estate to charity, the rate on the rest drops to 36%.
Do you pay Inheritance Tax on a house?
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.
Is there Inheritance Tax between husband and wife?
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.
How can you reduce Inheritance Tax?
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.
Related calculators & guides
Sources — official UK figures
Last reviewed June 2026 against official rates · How we calculate →
An estimate using 2026/27 thresholds. It doesn't model gifts made in the seven years before death, trusts, business or agricultural relief, or the full charity-rate test. Inheritance Tax is complex — for anything significant, speak to a solicitor or qualified estate-planning adviser. This is not financial or legal advice.