How much inheritance tax will my estate pay?
- Nic Round: Chartered Wealth Manager
- Feb 13
- 3 min read
Updated: 1 day ago
How much inheritance tax will my estate pay?
In the UK, inheritance tax (IHT) is charged at 40% on the value of your estate above certain allowances. But the actual amount payable depends on your marital status, property ownership, and how your estate is structured.
Behind this question are usually real concerns:
Will my family face a large tax bill?
Will they need to sell property to pay it?
Do I exceed the thresholds?
Is planning required now?
Understanding how inheritance tax is calculated is the first step toward clarity.
The starting point: the 40% rate
Inheritance tax is generally charged at 40% on the portion of your estate that exceeds available allowances.
But most estates do not pay 40% on everything.
Only the value above your tax-free thresholds is taxable.
The main inheritance tax allowances
The nil-rate band
Every individual typically has a £325,000 tax-free allowance.
If your estate is below this, inheritance tax is usually not payable.
The residence nil-rate band
If you leave your main home to direct descendants (such as children or grandchildren), you may qualify for an additional allowance of up to £175,000.
This can increase the total personal threshold to £500,000.
Married couples and civil partners
Assets left to a spouse or civil partner are generally exempt from inheritance tax.
In addition, unused allowances can usually be transferred.
This means a couple may pass up to £1 million free from inheritance tax if structured correctly.
A simple example
Example 1 — Single person
Estate value: £900,000
Nil-rate band: £325,000
No residence allowance applied
Taxable estate: £575,000Inheritance tax at 40%: £230,000
Example 2 — Married couple, home left to children
Combined estate: £900,000
Combined allowances: up to £1 million
Potential inheritance tax: £0
The difference lies not in the rate, but in the structure.
What is included in your estate?
Your estate typically includes:
Property
Savings
Investments
Personal possessions
Business interests (subject to reliefs)
Many pensions sit outside the estate for inheritance tax purposes, depending on structure and nomination.
Debts are deducted before tax is calculated.
Gifts and the seven-year rule
If you have made significant gifts within seven years of death, they may be added back into the estate calculation.
This can increase the taxable amount.
Taper relief may reduce the tax payable if death occurs between three and seven years after a gift.
The behavioural layer
Often the deeper concern is not the calculation itself.
It is:
Leaving a burden behind
Creating family conflict
Forcing the sale of assets
Not knowing whether planning is necessary
Inheritance tax planning is not about eliminating tax at any cost.
It is about aligning your estate with your intentions.
A more useful question
Instead of asking only:
How much inheritance tax will my estate pay?
A more practical question may be:
Does my estate exceed current thresholds, and are allowances being used efficiently?
That reframes the issue from fear of a tax bill to clarity about structure.
And structure is what determines outcome.
Some of the most common practical questions people ask about inheritance tax are below.
How is inheritance tax calculated in the UK?
Inheritance tax is calculated at 40% on the value of an estate above available allowances, after debts and certain reliefs are deducted.
Do married couples pay inheritance tax?
Assets left to a spouse or civil partner are generally exempt, and allowances can usually be transferred.
Is inheritance tax paid before beneficiaries receive assets?
Yes. The estate typically pays inheritance tax before assets are distributed.
Do pensions count towards inheritance tax?
Many defined contribution pensions sit outside the estate, depending on nomination and scheme rules.
A calm place to think first
If you are unsure how much inheritance tax your estate may pay, you may not need immediate restructuring.
Often the first step is simply to:
Estimate the value of your estate
Identify which allowances may apply
Clarify whether thresholds are likely to be exceeded
Clarity before planning avoids unnecessary complexity.
Evoa exists to provide that quiet thinking space — before advice, before action.
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