Estate IHT calculations
Assets, liabilities, exemptions, lifetime transfers and available nil-rate bands are brought into the death-estate calculation.
Inheritance Tax can arise on death, during lifetime gifting and within certain trusts. The calculation depends on the assets within the UK tax net, available exemptions and reliefs, historic gifts, the residence nil-rate band and, since April 2025, the individual's long-term UK residence position.
Effective IHT work starts with the balance sheet and ownership history. Simply comparing the estate with the £325,000 nil-rate band can miss transferable allowances, lifetime transfers, trust interests, business assets, overseas property and the conditions attached to the residence nil-rate band.
Approximate asset values and family circumstances are sufficient initially. Detailed records can follow securely.
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The starting point is the property actually within the IHT estate, followed by ownership, debts, lifetime transfers and the exemptions and reliefs available.
The £325,000 nil-rate band and £175,000 residence nil-rate band are not simply deducted from every estate. The calculation depends on qualifying property, spouse or civil partner exemptions, transferable allowances, lifetime gifts, estate value and the conditions attached to specialist reliefs.
The work can involve an estate following death, forward-looking lifetime planning or one specific issue such as gifts, overseas assets or business property.
Assets, liabilities, exemptions, lifetime transfers and available nil-rate bands are brought into the death-estate calculation.
Gifts to individuals, gifts into trust, annual exemptions and the seven-year rules are considered separately.
Qualifying residential interests, direct descendants, downsizing provisions and the estate-value taper are reviewed.
Qualifying property and the post-April 2026 agricultural and business relief allowance are analysed before the estate liability is finalised.
Long-term UK residence, overseas property and treaty issues are reviewed where the estate has cross-border assets.
Lifetime settlements and relevant-property trusts can involve entry, ten-year and exit charges outside the ordinary death-estate calculation.
The computation is built from ownership and values first so that allowances and reliefs are applied to the correct property.
We identify assets, ownership, debts, lifetime transfers, trusts and overseas interests.
Relevant open-market values, liabilities and valuation issues are assembled for the chargeable event.
Nil-rate bands, spouse exemption, charity exemption and specialist property reliefs are tested against the facts.
The resulting IHT position and required estate reporting are prepared consistently with the supporting schedules and valuations.
The headline thresholds remain frozen for 2026/27, but the amount actually available to an estate depends on lifetime transfers, qualifying residence and transferable unused percentages from a spouse or civil partner.
A qualifying surviving spouse or civil partner's estate can potentially benefit from transferred unused nil-rate band and residence nil-rate band from an earlier death. Where both sets of allowances are fully available, this can produce an overall combined threshold of up to £1 million for a qualifying couple's estate, but the residence and taper conditions still need to be met.
Current HMRC guidance covers the £325,000 nil-rate band, residence nil-rate band and applicable IHT rates.
Official IHT guidance ↗Current guidance explains potentially exempt transfers, exemptions and the seven-year rule for lifetime gifts.
Official gift guidance ↗Two recent reforms are especially important for larger or international estates: the move from domicile to long-term residence for foreign assets and the new restriction on 100% agricultural and business property relief.
The international scope of IHT should now be reviewed using residence history rather than relying on the old domicile terminology for post-5 April 2025 chargeable events. For business and agricultural estates, historic gifts and transfers can also interact with the new £2.5 million relief allowance.
Estate planning can involve trusts, capital gains, international residence and business ownership as well as the IHT calculation itself.
The standard nil-rate band remains £325,000. The residence nil-rate band can provide a further £175,000 where the qualifying-home and direct-descendant conditions are met.
The standard rate on the taxable part of a death estate is 40%. A reduced 36% rate can apply to the chargeable estate where the statutory charitable-giving conditions are satisfied.
Lifetime gifts to individuals can generally fall outside the death calculation if the donor survives seven years, but gifts into certain trusts are chargeable lifetime transfers and follow different rules.
A qualifying surviving spouse or civil partner's estate can potentially combine transferred unused standard and residence nil-rate bands to produce allowances of up to £1 million. This assumes full availability of both residence nil-rate bands and no taper or other restriction.
For chargeable events from 6 April 2025, the international scope of IHT generally uses the new long-term UK residence rules rather than the former domicile and deemed-domicile framework.
Broadly, the test can be met after UK residence for at least 10 of the previous 20 tax years, subject to transitional rules and detailed statutory provisions.
No. From 6 April 2026, however, the amount of qualifying agricultural and business property receiving 100% relief is generally subject to a combined £2.5 million allowance, with 50% relief applying above the available allowance.
No. Ownership, lifetime gifts, trusts, business assets and residence history can develop over many years. Earlier analysis can identify both genuine planning opportunities and transactions that would create unintended tax consequences.