What is the seven-year rule on gifts?

Gifts you make in the seven years before death are added back to your estate. Tax on those gifts tapers from 40% at year 0–3 down to 8% at year 6–7 — but only after using up the nil-rate band first.

Do my pension and life insurance count?

Currently most defined contribution pensions and life policies written in trust sit outside the estate. From April 2027 unused DC pensions will be brought inside IHT. Life policies written in trust are unaffected.

Do I need to pay IHT on my main home?

Your home is part of your estate, so it can attract IHT once you exceed the allowances. The residence nil-rate band was created to reduce this for ordinary family homes left to children — but it tapers away on estates above £2m.

What about cryptoassets and NFTs?

Digital property is taxed under the same IHT rules as any other asset. The Property (Digital Assets etc) Act 2025 confirms inclusion in the estate in England and Wales but does not change tax treatment. For an estate that contains meaningful crypto holdings, use the digital asset IHT calculator instead — it separates the digital element from the rest. The master guide on digital assets in your will explains drafting, executor access and the seed-phrase problem.

Tax & take-home pay

Inheritance Tax calculator (UK)

Inheritance Tax is charged at 40% on the part of an estate above the tax-free allowances. The headline £325,000 nil-rate band, the £175,000 residence nil-rate band and any unused allowance transferred from a spouse can take many estates out of IHT altogether.

Total estate valueEverything you own — property, savings, investments, possessions, less debts and funeral costs.£Marital status% of spouse's NRB unused at their death100% if everything passed to you tax-free, or you are still both alive.%Are you leaving your home to direct descendants?% of spouse's RNRB unused%

Estimated IHT: £0
Net to beneficiaries: £700,000
Effective rate: 0.0%

Nil-rate band£325,000 per person, plus transferred from spouse.	£650,000
Residence nil-rate band (before taper)£175,000 per person if home goes to direct descendants.	£350,000
RNRB taper (estates over £2,000,000)£1 lost for every £2 above £2m.	—
Total tax-free allowance	£1,000,000
Taxable estateCharged at 40%.	£0
Inheritance Tax due	£0

Both the £325,000 nil-rate band and £175,000 residence band are frozen until April 2030. From April 2027, most unused defined contribution pension funds will fall within IHT for the first time — a significant change for anyone planning to pass on a pension pot. Gifts in the seven years before death, lifetime trusts and business relief all change the figure — this calculator covers the straightforward case.

How it works

Start with your nil-rate band: £325,000. If you are married or in a civil partnership, any unused percentage from a deceased spouse can be transferred to your estate.
Add the residence nil-rate band: up to £175,000 per person, but only if your home (or proceeds from one you previously sold) passes to direct descendants — children, grandchildren or step-children.
If your estate is over £2 million, the residence band is tapered by £1 for every £2 above the threshold — disappearing entirely by £2.35m (single) or £2.7m (couple).
Apply 40% to whatever is left after deducting the total tax-free allowance. The estate (not the beneficiary) usually pays.

Common questions

What is the seven-year rule on gifts?: Gifts you make in the seven years before death are added back to your estate. Tax on those gifts tapers from 40% at year 0–3 down to 8% at year 6–7 — but only after using up the nil-rate band first.
Do my pension and life insurance count?: Currently most defined contribution pensions and life policies written in trust sit outside the estate. From April 2027 unused DC pensions will be brought inside IHT. Life policies written in trust are unaffected.
Do I need to pay IHT on my main home?: Your home is part of your estate, so it can attract IHT once you exceed the allowances. The residence nil-rate band was created to reduce this for ordinary family homes left to children — but it tapers away on estates above £2m.
What about cryptoassets and NFTs?: Digital property is taxed under the same IHT rules as any other asset. The Property (Digital Assets etc) Act 2025 confirms inclusion in the estate in England and Wales but does not change tax treatment. For an estate that contains meaningful crypto holdings, use the digital asset IHT calculator instead — it separates the digital element from the rest. The master guide on digital assets in your will explains drafting, executor access and the seed-phrase problem.

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