Inheritance Tax Calculator UK 2024/25

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You might have to pay inheritance tax (IHT) on the value of your estate. This is the sum of all taxable assets you own at death, such as most property, your possessions, funds in bank accounts etc.

HMRC levies inheritance tax at 40% on all assets you own above your nil-rate band threshold. This threshold stands at £325,000. If you as a single individual hold assets worth more than £325,000, you might face an inheritance tax bill of 40% of everything above this level.

If your estate is larger than £325,000, there are two main ways to potentially increase the above threshold and avoid inheritance tax on a higher amount of assets:

The Main Residence Nil-Rate Band

If you own a home and pass it as your main residence to direct descendants (children / stepchildren, grandchildren etc.), you can use the main residence nil-rate band. It’s an extra allowance that stands at £175,000 in the 2024/25 tax year. Thereafter, it rises with inflation.

It applies to all estates worth less than £2 million. For estates worth more than this, it tapers down by £1 for each £2 over £2 million.

The Transferrable Nil-Rate Band

The transferrable nil-rate band lets married couples / civil partners can pass their £325,000 nil-rate band to each other. On the death of the first partner, if the deceased leaves everything to the surviving partner, it potentially doubles the survivor’s £325,000 nil-rate band to £650,000.

This means the surviving partner can leave assets of £650,000 on their death without any inheritance tax.

Combined Nil-Rate Bands

For a single individual, the combined 2020/21 main residence nil-rate band of £175,000 and the nil-rate band of £325,000 lets you leave up to £500,000 to direct descendants without your estate paying any inheritance tax.

In a marriage / civil partnership, each partner has their own nil-rate band and main residence nil-rate band. You can also transfer the main-residence nil-rate band between partners, therefore leaving up to a combined total of potentially £1 million to direct descendants without paying any inheritance tax.

How Do I Calculate My Inheritance Tax Bill?

To work out your potential inheritance tax liability from the start of the 2024/25 tax year, you’ll need to:

  • Calculate the value of everything you own (your estate)
    This includes cash in the bank / taxable investments, your main residence / any other properties, jewellery, cars, furniture, payments made on death (e.g. Life Insurance payouts not written into trust) etc.
  • Deduct your £325,000 nil-rate band allowance
    If you’re a widow(er) and a spouse / civil partner has died before you, or you’re passing on your main residence to direct descendant(s), this figure could be higher (see above)
  • Deduct any debts
    Mortgages, overdrafts, loans, credit cards, payments due for services rendered while the individual was alive etc.

If this sounds complicated, don’t worry — it can be! That’s why we’ve built our quick and easy Inheritance Tax Calculator. Simply enter your assets and liabilities and a few more simple questions to calculate your potential inheritance tax bill.

Inheritance Tax Calculator

Simply follow these four quick steps to work out your potential inheritance tax liability.

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  • Excluding pensions and business/agricultural assets.
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How is Inheritance Tax Calculated?

To summarise…

  • Work out 40% on all taxable assets over and above your tax-free allowances (e.g. the nil-rate band and residence nil-rate band).
  • You can pass up to 100% of these allowances to your spouse / civil partner if you leave everything to them on your death. This potentially doubles the allowances the surviving partner has before they’ll pay inheritance tax on their death.
  • You don’y pay inheritance tax on all assets. For example, full or partial reliefs exist on agricultural property (e.g. farmland) and business property (e.g. shares in certain businesses). Seek expert advice about such assets.
  • Deduct liabilities the deceased owed at the date of death, such as loans, mortgages, credit cards etc.

Need Help? Get Expert Inheritance Tax Advice

If you’re struggling to figure out much inheritance tax you’ll pay, you’re not alone. It’s not a simple calculation, as you see above!

While our Inheritance Tax Calculator is a good place to start, it’s no substitute for an expert’s advice. With our expert knowledge of inheritance tax, we can make recommendations as to the best way to minimise the inheritance tax bill for your loved ones.

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