What is the nil-rate band?

The nil-rate band (NRB) is the £325,000 of an estate that is taxed at 0%. Only the value above it (after other reliefs) is charged at 40%. The band has been frozen at £325,000 and is set to remain so for several more years.

How does the residence nil-rate band work?

The residence nil-rate band (RNRB) adds up to £175,000 of extra tax-free allowance when a home is left to direct descendants such as children or grandchildren. It tapers away by £1 for every £2 the estate exceeds £2 million, disappearing entirely on very large estates.

What is the seven-year rule?

Gifts made within seven years of death can be added back to the estate. If you die within three years the full 40% may apply; between three and seven years taper relief reduces the tax on the portion of gifts above the nil-rate band. Survive seven years and the gift normally falls out of the estate.

Can I inherit my late spouse's unused bands?

Yes. A surviving spouse or civil partner can inherit the percentage of the nil-rate band and residence nil-rate band their partner did not use, potentially doubling both allowances to £650,000 plus £350,000.

When does the reduced 36% rate apply?

If you leave at least 10% of the net estate (after deducting the nil-rate band) to charity, the rate on the rest of the chargeable estate drops from 40% to 36%. The tool applies this automatically when the charity bequest meets the threshold.

UK Inheritance Tax Calculator

The UK Inheritance Tax Calculator estimates the IHT payable on an estate using current HMRC rules: the £325,000 nil-rate band, the £175,000 residence nil-rate band, the 40% standard rate (or 36% with charity relief), transferable spousal allowances, and seven-year taper relief on lifetime gifts. It is aimed at executors, will-writers and anyone doing estate planning who wants a clear, private estimate before taking formal advice.

How it works

The estate value, less debts and liabilities, gives the net estate. The tool then works out the available allowances. The nil-rate band (NRB) shields £325,000; if you inherited unused bands from a late spouse, both bands can double. The residence nil-rate band (RNRB) adds up to £175,000 when a home passes to direct descendants, but it tapers away by £1 for every £2 the estate exceeds £2 million.

Tax is charged on what remains:

taxable estate = net estate − charity bequest − (NRB + RNRB)
estate tax     = taxable estate × rate

The rate is 40%, dropping to 36% when at least 10% of the post-NRB estate is left to charity. Separately, a failed gift (a gift made within seven years of death) uses the nil-rate band first, and any tax on the excess is reduced by taper relief: 20% relief at 3–4 years, rising to 80% at 6–7 years.

Example and notes

Consider a £900,000 estate with a £450,000 home left to children, no spousal transfer and no charity gift. The NRB (£325,000) plus RNRB (£175,000) shield £500,000, leaving £400,000 taxable at 40% — an IHT bill of £160,000. Add a transferable set of bands from a late spouse and the allowances rise to £1,000,000, wiping out the tax entirely.

This is an estimate only. Business and agricultural relief, gifts with reservation of benefit, trusts and the precise treatment of jointly-owned assets are not modelled. It is not tax advice — confirm with a solicitor or HMRC.