Your estate details
£
£
£
Inheritance tax liability
£0
due on your estate
£0Your IHT threshold
£0Taxable estate
£0Net to beneficiaries
40%IHT rate applied
For guidance only — not financial, tax or legal advice. Verify with a qualified professional.
About inheritance tax in the UK
What is the nil-rate band and residence nil-rate band?
The nil-rate band (NRB) is £325,000 — the amount of your estate that is free from IHT. The residence nil-rate band (RNRB) is an additional £175,000, but only applies if you leave your main home (or equivalent value) to direct descendants such as children or grandchildren. Combined, a single person can pass on up to £500,000 free of IHT if they own a home.
How does the married couple exemption work?
Assets left to a spouse or civil partner on death are completely exempt from IHT. Any unused nil-rate band and residence nil-rate band can be transferred to the surviving spouse. This means a couple who leave everything to each other can potentially pass on up to £1,000,000 free of IHT (2 × £325k NRB + 2 × £175k RNRB) to their children.
What are the main ways to reduce IHT?
Key strategies include: gifting money to family (gifts are potentially exempt if you survive 7 years), using the annual gift allowance (£3,000/year per person, tax-free), leaving 10%+ of your estate to charity (reduces IHT rate to 36%), taking out a whole-of-life insurance policy to cover the IHT bill, investing in Business Relief-qualifying assets, and pension planning (pensions are usually outside your estate). Get advice from a specialist solicitor or financial planner.
When does the RNRB taper off?
The residence nil-rate band reduces by £1 for every £2 that your estate exceeds £2 million. It is fully withdrawn at £2.35 million. This tapered withdrawal effectively creates a marginal IHT rate of 60% on estates between £2m and £2.35m — a significant trap for high-value estates.