How Much Inheritance Tax Do I Pay in 2026? UK Thresholds, Rates and Calculator
Key Takeaway:
With thresholds frozen until 2030 and property values rising, more UK families than ever face the 40% inheritance tax rate. However, only around 6% of estates actually pay IHT. Use our free calculator to check your position in minutes.
Wondering how much inheritance tax your family might have to pay? You're not alone. With thresholds frozen until 2030 and property values continuing to rise, more UK families than ever are finding themselves caught by the 40% inheritance tax rate.
The good news? Only around 6% of estates actually pay inheritance tax. But if yours does exceed the threshold, the tax bill can be substantial.
In this guide, we'll explain exactly how inheritance tax works in 2026, what the current thresholds are, and how you can calculate what your family might owe.
What Is Inheritance Tax?
Inheritance tax (IHT) is a tax on the estate of someone who has died. Your estate includes everything you own: property, savings, investments, vehicles, businesses and personal possessions, minus any debts and funeral expenses.
The tax is paid by the estate before assets are distributed to beneficiaries. This means your loved ones don't personally pay the tax, but it does reduce what they inherit.
Inheritance Tax Thresholds 2026
There are two main tax-free allowances that determine whether your estate will pay inheritance tax:
| Allowance | Per Person | Married Couple |
|---|---|---|
| Nil-Rate Band (NRB) | £325,000 | £650,000 |
| Residence Nil-Rate Band (RNRB) | £175,000 | £350,000 |
| Maximum Tax-Free Total | £500,000 | £1,000,000 |
The Nil-Rate Band (£325,000)
Everyone has a personal allowance of £325,000. No inheritance tax is charged on estates worth up to this amount. This threshold has been frozen since 2009 and will remain at £325,000 until at least April 2030.
The Residence Nil-Rate Band (£175,000)
If you leave your main home to direct descendants (children, stepchildren or grandchildren), you can claim an additional £175,000 allowance. This means an individual could pass on up to £500,000 tax-free.
Important:
The residence nil-rate band is tapered for estates worth more than £2 million. It reduces by £1 for every £2 over the threshold, disappearing entirely at £2.35 million.
What Is the Inheritance Tax Rate?
The standard inheritance tax rate is 40%. However, this only applies to the portion of your estate that exceeds your available allowances.
Example:
- Your estate is worth £500,000 and you only qualify for the nil-rate band of £325,000.
- Taxable amount: £500,000 - £325,000 = £175,000
- Inheritance tax due: £175,000 x 40% = £70,000
Reduced rate: If you leave at least 10% of your net estate to charity, the inheritance tax rate drops to 36%.
How to Calculate Your Inheritance Tax
Calculating inheritance tax can seem complicated, but it follows a straightforward process:
- Step 1: Add up the value of all assets (property, savings, investments, possessions)
- Step 2: Subtract any debts and funeral expenses
- Step 3: Subtract gifts made within 7 years of death (if applicable)
- Step 4: Subtract your available allowances (nil-rate band + residence nil-rate band if applicable)
- Step 5: Apply 40% tax to any remaining amount
Want a quick answer?
Use our free inheritance tax calculator to find out exactly what your family might owe in just 2 minutes.
Who Is Exempt from Inheritance Tax?
Several exemptions can reduce or eliminate your inheritance tax bill:
- Spouse or civil partner: Anything you leave to your spouse or civil partner is completely exempt from inheritance tax. They can also inherit your unused allowances, potentially doubling the tax-free threshold to £1 million.
- Charities: Gifts to registered charities are exempt from inheritance tax.
- Small estates: Estates worth less than £325,000 (or £500,000 if leaving a home to direct descendants) pay no inheritance tax.
Gift Allowances and the 7-Year Rule
You can reduce your estate by giving gifts during your lifetime. Several annual exemptions apply:
| Gift Type | Annual Allowance |
|---|---|
| Annual exemption | £3,000 total per year |
| Small gifts | £250 per person (unlimited recipients) |
| Wedding gift to child | £5,000 |
| Wedding gift to grandchild | £2,500 |
| Wedding gift to others | £1,000 |
The 7-Year Rule
Larger gifts become exempt from inheritance tax if you survive for 7 years after making them. If you die within 7 years, the gift may be taxed at a reduced rate through taper relief:
| Years Between Gift and Death | Tax Rate Applied |
|---|---|
| 0-3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% (exempt) |
When Is Inheritance Tax Due?
Inheritance tax must be paid within 6 months of the end of the month in which the person died. For example, if someone dies in February, the tax is due by the end of August.
Interest is charged on late payments, so it's important to act quickly. In some cases, you can pay inheritance tax on property in instalments over 10 years.
Changes Coming in 2026 and 2027
Several important changes are taking effect:
- From 6 April 2026: Agricultural and business property relief provide 100% relief up to a combined £2.5 million allowance per person. Assets above this allowance receive 50% relief.
- April 2027: Unused pension savings will be included in estates for inheritance tax purposes for the first time.
- Until 2030: The nil-rate band and residence nil-rate band will remain frozen at current levels.
Do I Need a Probate Solicitor?
While you can handle inheritance tax and probate yourself, many families find the process complex and time-consuming. Common challenges include:
- Valuing property accurately
- Understanding which reliefs apply
- Completing HMRC forms correctly
- Meeting tight payment deadlines
A probate solicitor can guide you through each step, help you claim all available reliefs, and ensure you don't pay more tax than necessary.
Calculate Your Inheritance Tax Now
Not sure if you'll be affected by inheritance tax? Our free calculator gives you an instant estimate based on your estate value and circumstances.
Try the free IHT calculator - Takes just 2 minutes
Need professional help with probate? We can connect you with experienced probate solicitors in your area who specialise in inheritance tax and estate administration.
Frequently Asked Questions
Q: Do I have to pay inheritance tax on my parents' house?
A: It depends on the total value of the estate, not just the house. If the combined estate (including the property) exceeds available allowances, inheritance tax may be due on the excess. However, if the house passes to you as a direct descendant, the £175,000 residence nil-rate band may apply.
Q: Who actually pays the inheritance tax?
A: The estate pays inheritance tax, not the beneficiaries directly. The executor or administrator must pay the tax from estate funds before distributing assets to beneficiaries.
Q: Can I give my house away to avoid inheritance tax?
A: You can, but with significant restrictions. If you continue to live in the property rent-free after giving it away, it remains part of your estate for inheritance tax purposes. This is called a "gift with reservation of benefit."
Q: What happens if I can't afford to pay the inheritance tax?
A: You may be able to pay inheritance tax on property in annual instalments over 10 years. Some families take out loans or sell assets to cover the bill. Speaking to a probate solicitor can help you understand your options.
Disclaimer:
Last updated: February 2026. This guide is for general information only and does not constitute legal or financial advice. Tax laws change frequently and everyone's circumstances are different. For advice specific to your situation, please consult a qualified probate solicitor or tax advisor.