Inheritance Tax Calculator

Inheritance tax (IHT) calculator FAQs

Will this tell me how to reduce inheritance tax bill uk?

Many of you will want to know how much inheritance tax you may have to pay so our inheritance tax calculator will calculate the tax liability for you. Your IHT bill is essentially the total of your assets, less exempt gifts and the available allowances explained below. For specific advice on your individual circumstances and to explore ways to reduce your inheritance tax liability contact us professional advice.

 

How Do I Calculate My Inheritance Tax Liability?

To calculate your potential inheritance tax bill use the above calculator. The total value of your estate less the available allowances, will give you the amount over the IHT threshold. Normally, 40% of this excess amount is the IHT bill on your estate. You pay inheritance tax from the total value of your estate prior to it being distributed.

 

Can inheritance tax allowance be transferred?

Subject to your marital status all, or part, of any unused IHT allowances can be transferred to your spouse or civil partner on death. Gifts to anyone else outside of your marriage or civil partnership will use up your available allowance whilst gifts to spouse or civil partner are transferred without using the available allowances and are generally IHT free.

 

What if my personal circumstances are too complicated for the calculator?

The above calculator is a guide only. For anyone seeking advice on their potential IHT liability, how much IHT you are likely to pay and ways to mitigate, contact us for a free initial consultation.

 

What is nil rate band inheritance tax?

The nil rate band tax (NRB), also know as the inheritance tax threshold, is the amount up to which no IHT liability would be due. For 2022/23 tax year the first £325,000 of an individual’s estate is free from IHT liability. Non exempt gifts use up your available allowance and are potentially subject to IHT.

 

Residence nil rate band

There is further allowance known as the residence nil rate band which is available on top of the above above allowance in certain circumstances. The residence nil rate band amount is currently £175,000 for tax year 2023/23 and is available if the main residence is being left to a direct descendant. This means that by using the NRB and residence nil rate band together, a person’s estate can pass up to £500,000.

Gifts made during your lifetime will gradually fall outside of IHT over a period of 7 years with the amount of IHT due reducing over that time on a sliding scale. You can also make use other available allowances including the £3,000 per annum gift allowance (£6,000 for a married couple), the £250 ad-hoc gift rule and gifts out of regular income.

Some of these rules can be quite complicated, again we would encourage anyone looking to reduce their IHT liability to contact us.

 

What qualifies for business relief?

Business relief (BR) qualifying assets, previously known as business property relief, can be a way of mitigating inheritance tax more quickly than the 7 year rule above . They are subject to specific tax treatment. Any investment into BR qualifying assets can be free of IHT providing that the investment has been held for 2 years at the time of death.

Not all types of investments qualify for BR and the tax treatment depends on specific rules set out by HMRC, that it is why it is essential to speak to a professional adviser on all tax reliefs available.

 

The Financial Conduct Authority does not regulate tax advice.

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