Inheritance Tax Calculator UK 2025/26

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 2025/26 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 2025/26 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.

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 specialist advice about such assets.
• Deduct liabilities the deceased owed at the date of death, such as loans, mortgages, credit cards etc.

Need Help? Get Specialist 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 a specialist’s advice. With our specialist knowledge of inheritance tax, we can make recommendations as to the best way to minimise the inheritance tax bill for your loved ones.

Why Speak to Us?

We started Drewberry because we were tired of being treated like a number. We want to give you as our client the service you deserve when discussing matters as important as planning your financial future.

Below are just a few reasons why it makes sense to let us help:

• See your financial future
  Our sophisticated financial modelling technology visually maps out your financial future. Get a living financial plan that clearly shows what you can achieve depending on the decisions you make — read more here.
• Achieve the retirement you deserve
  Can you afford that dream round-the-world trip? Can you help your children onto the property ladder? We’ll model your goals and build your financial plan to help you achieve them.
• Our knowledge saves you time and provides peace of mind
  We take care of it all, from organising your pensions, investing your assets, managing risk and making the most of your tax allowances.
• We’ve got bargaining power on our side
  This allows us to negotiate better rates for you than dealing with providers yourself.
• You’ll speak to a dedicated specialist from start to finish
  You’ll speak to a named specialist with a direct phone line and email. No more call centres and machines asking you to press this and that — you’ll speak to someone who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing 5-star service, as seen in our 4008 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  Our regulated advice service means you are protected. We’re responsible for the decisions we help you make. Doing it yourself or going direct to a provider doesn’t offer this protection, so you won’t benefit from these securities.