How it works
Taxable estate = estate − gifts to a spouse or charity − £325,000 nil-rate band − residence nil-rate band (up to £175,000, no more than the home left to direct descendants, and reduced by £1 for every £2 the estate is over £2 million). Tax is 40%, or 36% if at least 10% of the net estate goes to charity.
A worked example
A £600,000 estate including a £300,000 home left to children uses the £325,000 nil-rate band and £175,000 residence nil-rate band, leaving £100,000 taxable. At 40%, Inheritance Tax is £40,000. With a late spouse's full allowances transferred, there is no tax to pay.
What to keep in mind
An estimate for estates of people who die in the 2026/27 tax year. Assumes the transferred allowances are 100% where selected. Excludes lifetime gifts within 7 years, trusts, business and agricultural relief, and foreign assets. From 6 April 2027 most unused pension pots are due to count towards the estate. Get advice for a real estate.
How much can you leave tax-free?
Everyone has a £325,000 nil-rate band. If you leave your home to your children or grandchildren, you get up to £175,000 more through the residence nil-rate band, making £500,000. Married couples and civil partners can pass any unused allowance to each other, so a couple can leave up to £1 million tax-free.
Spouses, civil partners and charities
Anything left to a spouse or civil partner who lives in the UK is free of Inheritance Tax, and so is anything left to a UK charity. If you leave at least 10% of your net estate to charity, the rate on the rest falls from 40% to 36%.
Estates over £2 million
The residence nil-rate band shrinks by £1 for every £2 the estate is worth over £2 million. A single person's home allowance disappears completely at £2.35 million.
Gifts and the 7-year rule
Gifts made more than 7 years before death are usually free of Inheritance Tax. You can also give away £3,000 a year, plus small gifts of up to £250 per person, without them counting. Larger gifts within 7 years can be taxed, with taper relief after 3 years.
Frequently asked questions
What is the Inheritance Tax threshold in 2026/27?
£325,000, plus up to £175,000 more if you leave your home to direct descendants. These are frozen until April 2030.
How much Inheritance Tax will my children pay?
The estate pays it, usually from the money left before it is shared out. It is 40% of everything above the tax-free allowances.
Can a married couple leave £1 million tax-free?
Yes, if the home goes to children or grandchildren and both sets of allowances are used: £325,000 + £175,000 each.
Do I pay Inheritance Tax on money left to my wife or husband?
No. Gifts to a UK spouse or civil partner are exempt.
Are pensions subject to Inheritance Tax?
From 6 April 2027, most unused pension funds and death benefits are due to be included in the estate for Inheritance Tax.
Sources & rates
Rates checked on 7 October 2026.
For general information and planning, not personalised financial or tax advice. Verify important decisions with a qualified adviser.