How much inheritance tax do I pay on a £500,000 estate UK?

A single person leaving a £500,000 estate (including their home to children) pays 0% IHT · they have a £325,000 nil rate band plus £175,000 residence nil rate band = £500,000 threshold. If the estate exceeds £500,000, IHT is charged at 40% on the excess.

What is the inheritance tax threshold UK 2026?

The nil rate band is £325,000 per person in 2026/27, frozen until at least 2030. With the residence nil rate band (£175,000 for passing your home to children), the effective threshold is £500,000 per person · or £1,000,000 for married couples combining both allowances.

Do I pay inheritance tax on my parents house?

IHT is paid by the estate, not the beneficiary · your parents' estate pays it before assets are distributed. If the total estate (including the house) is below the available threshold (up to £1,000,000 for a couple), no IHT is due. Above the threshold, 40% is charged on the excess.

How can I reduce inheritance tax on my estate?

Key IHT reduction strategies: gift assets early (7-year rule), use annual gift exemptions (£3,000/year), leave money to charity (reduces rate to 36%), write life insurance in trust, maximise pension contributions (currently outside estate), and consider business property relief investments.

Inheritance Tax Calculator 2026/27 · IHT Threshold & 7-Year Rule

Estimated IHT Liability

£0

On an estate of £600,000

Gross Estate

£0

Nil Rate Band Available

£325,000

Residence NRB

£0

Taxable Estate

£0

IHT Rate

40%

IHT Owed

£0

Enter your estate details to see the estimated IHT liability.

Estate Breakdown

IHT Thresholds Explained 2026/27

The Nil Rate Band (NRB) is £325,000 per person. Any part of the estate below this threshold is free from Inheritance Tax. Married couples and civil partners can combine their allowances · if one spouse dies without using their NRB, it passes to the survivor, potentially doubling the threshold to £650,000.

The Residence Nil Rate Band (RNRB) is an additional £175,000 available when you leave your main home to direct descendants (children, step-children, grandchildren). Again, married couples can combine, giving up to £350,000 RNRB. The RNRB tapers by £1 for every £2 of estate value above £2 million.

Combined maximum tax-free threshold (married couple passing to children): £1,000,000 (£650,000 NRB + £350,000 RNRB).

IHT rate: 40% on the taxable estate. Reduced to 36% if 10% or more of the net estate is left to charity.

Inheritance Tax · How Much Will My Estate Pay? 2026/27

IHT at 40% on estate value above available thresholds. Assumes standard nil rate band (£325,000) and residence nil rate band (£175,000) where applicable.

Estate Value	Single (no RNRB)	Single (with RNRB)	Couple (both NRB+RNRB)
£300,000	£0	£0	£0
£400,000	£30,000	£0	£0
£500,000	£70,000	£0	£0
£600,000	£110,000	£40,000	£0
£750,000	£170,000	£100,000	£0
£1,000,000	£270,000	£200,000	£0
£1,500,000	£470,000	£400,000	£200,000
£2,000,000	£670,000	£600,000	£400,000

Inheritance Tax FAQs

What is the inheritance tax threshold for 2026/27?

The nil rate band (NRB) is £325,000 per person, frozen until at least 2030. If you leave your home to direct descendants, an additional residence nil rate band (RNRB) of £175,000 applies · giving a single person an effective threshold of £500,000. Married couples and civil partners can combine both allowances, meaning up to £1,000,000 can pass to children completely free of IHT.

How much IHT will my estate pay on £500,000?

A single person leaving a £500,000 estate including their home to children pays £0 IHT · the NRB (£325,000) plus RNRB (£175,000) covers the full amount. Without the RNRB (e.g. no property or not left to descendants), the taxable amount above £325,000 is £175,000 · giving an IHT bill of £70,000 at 40%.

What is the seven-year gift rule for IHT?

Gifts made more than 7 years before death are completely exempt from IHT. Gifts made within 7 years may be included in the estate. Taper relief reduces the effective IHT rate on gifts made between 3 and 7 years before death: 32% for gifts 3–4 years prior, reducing to just 8% for gifts made 6–7 years before death. The annual gift exemption of £3,000/year is always exempt regardless of when you die.

Does leaving money to charity reduce my IHT bill?

Yes · in two ways. Charitable gifts are deducted from your estate before IHT is calculated. Additionally, if you leave at least 10% of your net estate to charity, the IHT rate on the remainder reduces from 40% to 36%. For larger estates this can produce a meaningful saving while supporting causes you care about. Gifts to registered UK charities and certain other bodies qualify.

Are pensions subject to inheritance tax? The 2027 change explained.

Currently (2026/27), defined contribution pension pots sit outside your estate for IHT purposes · making them a highly tax-efficient way to pass wealth. However, from April 2027 the government has announced that unused pension funds will be brought into the estate for IHT. This is a significant change · anyone with large pension pots should review their estate planning before April 2027 and consider taking advice on the most efficient way to draw or distribute their pension.

UK Inheritance Tax Calculator 2026/27

Inheritance Tax · How Much Will My Estate Pay? 2026/27

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