What Inheritance Tax is
Who this guide is for: For people trying to understand how UK Inheritance Tax works on an estate — not a substitute for solicitor, tax adviser or HMRC figures.
Inheritance Tax (IHT) is a tax on the estate of someone who has died — their property, money and possessions. There is normally nothing to pay if the estate is below the available thresholds, or if everything above the threshold passes to a spouse or civil partner, a charity or a community amateur sports club.
You may still need to report the estate's value even when no tax is due. Official reporting rules are on GOV.UK.
How an estate calculation fits together
- Step 1Value the estate
- Step 2Deduct debts and liabilities
- Step 3Apply exemptions
- Step 4Use nil-rate bands
- Step 5Charge tax on the remainder
Start with everything that forms part of the estate at death, deduct allowable debts and funeral expenses where they qualify, then apply exemptions such as amounts left to a spouse or civil partner. What remains is tested against the nil-rate band and, where available, the residence nil-rate band. Tax is usually charged at 40% on the taxable remainder.
Keep three ideas separate when you read about Inheritance Tax:
- Estate calculation — assets, debts, spouse or civil-partner exemption and the nil-rate band at death.
- Residence nil-rate band — an extra allowance when a qualifying home interest passes to direct descendants. Covered in depth in Residence Nil-Rate Band.
- Lifetime gifts — gifts in the seven years before death can use the nil-rate band and may create tax of their own. See Inheritance Tax on Gifts.
Nil-rate band and the standard rate
| Item | Amount / rate |
|---|---|
| Nil-rate band (NRB) | £325,000 |
| Residence nil-rate band (RNRB) maximum | £175,000 |
| RNRB taper starts above estate measure of | £2,000,000 |
| Standard Inheritance Tax rate | 40% |
| Reduced rate if enough is left to charity | 36% on some assets (conditions apply) |
The nil-rate band is the slice of chargeable estate that can pass at 0% before the standard rate applies. Current published amounts are a nil-rate band of £325,000 (GOV.UK table through 5 April 2031), a residence nil-rate band maximum of £175,000, and residence taper starting above £2,000,000. Always confirm the figures that apply to the date of death on GOV.UK.
If 10% or more of the estate's net value is left to charity in the will, a reduced 36% rate can apply to some assets. The Sorvuna calculator does not model that reduced rate.
Spouse exemption and transferring unused allowances
Gifts and bequests to a spouse or civil partner are normally exempt from Inheritance Tax when the couple meet the official conditions (including living in the UK permanently for lifetime gifts). Anything left above the threshold to a spouse or civil partner can therefore remove tax on that part of the estate.
If the first of a married couple or civil partnership dies without using their full nil-rate band — and, where relevant, residence nil-rate band — unused allowance can often transfer to the survivor as a percentage. The ordinary nil-rate band and the residence nil-rate band are separate, so the unused percentage transferred for each can differ. Transfer is not automatic in every situation, and the survivor's estate still has to meet the rules when they die.
Residence nil-rate band in brief
Leaving a home (or a share of one) to children, grandchildren or other direct descendants can increase the tax-free amount by up to the residence nil-rate band — currently £175,000 on top of the £325,000 nil-rate band, before any transfer from a late spouse or civil partner. The allowance is capped by the value of the home interest that actually passes to those descendants, and it tapers away for estates above £2,000,000.
For conditions, taper, transfer and downsizing, use the dedicated Residence Nil-Rate Band guide.
Worked examples
Estate above the nil-rate band (no residence claim)
Illustrative death date 2026-06-15. Computed with the Sorvuna Inheritance Tax engine used by the public calculator.
| Other estate assets | £500,000.00 |
|---|---|
| Nil-rate band used | £325,000.00 |
| Taxable estate | £175,000.00 |
| Estimated Inheritance Tax at 40% (key figure) | £70,000.00 |
Assumes no debts, no spouse exemption, no residence nil-rate band and no lifetime gifts.
Home and other assets with residence nil-rate band
Illustrative death date 2026-06-15. Home asserted to pass to direct descendants.
| Main home | £300,000.00 |
|---|---|
| Other assets | £190,000.00 |
| Gross estate | £490,000.00 |
| Nil-rate band available | £325,000.00 |
| Residence nil-rate band available | £175,000.00 |
| Taxable estate | £0.00 |
| Estimated Inheritance Tax (key figure) | £0.00 |
Estimated tax is £0 because the chargeable estate is covered by the combined available nil-rate band and residence nil-rate band (max(0, estate − NRB − RNRB) × 40%). Which band is treated as partly unused for a later transfer claim can depend on presentation order; HMRC confirms that can matter for unused percentages even when tax due is unchanged. The Sorvuna calculator does not reconstruct a first death for transfer — enter unused percentages on the survivor calculation.
Estimate estate-at-death Inheritance Tax from assets, debts, spouse exemption and available nil-rate bands Use the Inheritance Tax Calculator
Reliefs and exemptions at a high level
Beyond the nil-rate bands and spouse exemption, estates may qualify for other reliefs — for example Business Relief or Agricultural Property Relief on qualifying assets, or charity-related rules. Those reliefs have their own conditions and caps. From 6 April 2026, the amount of estate that can still get 100% Business Relief and Agricultural Property Relief is subject to an official combined allowance; confirm current GOV.UK material for the death date.
Sorvuna's public Inheritance Tax Calculator does not model Business Relief, Agricultural Property Relief, trusts, foreign or domicile complexity, or the charity reduced rate.
What beneficiaries normally do and do not pay
Beneficiaries do not normally pay Inheritance Tax on assets they inherit. The estate usually pays. A beneficiary may later pay other taxes — for example Income Tax on rental income from an inherited property, or Capital Gains Tax if they later sell an asset and make a gain.
Someone who received a lifetime gift can be asked to pay Inheritance Tax on that gift if the donor dies within seven years and the nil-rate band has already been used. That path is explained in Inheritance Tax on Gifts.
Pensions: current rules and deaths from 6 April 2027
Before 6 April 2027: whether unused pension funds or death benefits form part of the Inheritance Tax estate depends on the scheme rules, ownership and trust arrangements. There is no single "pensions are always outside the estate" rule. Check the scheme and official guidance for the death date.
From 6 April 2027: HMRC's technical note confirms that most unused pension funds and pension death benefits ("notional pension property") are brought within the value of the deceased's estate for Inheritance Tax. Personal representatives are responsible for reporting and paying any Inheritance Tax due on those amounts. Death-in-service benefits payable from a registered pension scheme remain out of scope of Inheritance Tax under the measure as published.
Secondary legislation, guidance and HMRC tools for the new process are still being published ahead of April 2027. Use the GOV.UK technical note and measure pages linked in the sources for the latest official position.
The Sorvuna Inheritance Tax Calculator does not add unused pensions into the estate for deaths from 6 April 2027. If pension wealth matters, treat the calculator result as incomplete for that scenario until a future calculator update models the reform.
How the Sorvuna calculator helps — and its limits
The Inheritance Tax Calculator estimates tax for a UK individual estate at death using main home value, other assets, debts, funeral expenses, spouse or civil-partner exemption, unused nil-rate band transfer percentages, and an asserted residence nil-rate band path. Supported death dates run from 6 April 2020 to 5 April 2030 inclusive.
It does not model:
- lifetime gifts, PETs or gift taper
- gifts with reservation of benefit
- downsizing addition
- Business Relief or Agricultural Property Relief
- trusts or foreign / domicile complexity
- the 36% charity reduced rate
- pension inclusion for deaths from 6 April 2027
Explore the cluster from the Inheritance Tax hub.