How Much Is Inheritance Tax? Worked Examples at Five Estate Sizes
From an estate with nothing due to a £2m+ estate losing the residence band — five worked Inheritance Tax examples using gov.uk's own thresholds and the 40%/36% rates.
The short answer
There is no single ‘Inheritance Tax rate’ on an estate — it's 40% only on whatever sits above your available thresholds. Below are five estates, from one that pays nothing to one that's lost its residence band entirely, all worked on gov.uk's own thresholds and the 40% standard rate.
Five estates, five outcomes
| Net estate | Tax-free threshold available | Taxable | Inheritance Tax at 40% |
|---|---|---|---|
| £300,000 | £325,000 | £0 | £0 — below the threshold |
| £500,000 | £500,000 | £0 | £0 (home left to children) |
| £920,000 | £1,000,000 | £0 | £0 (couple, full transfer, home to children) |
| £1,600,000 | £500,000 | £1,100,000 | £440,000 (single person, residence band not tapered) |
| £2,400,000 | £325,000 | £2,075,000 | £830,000 (residence band fully tapered away above £2,000,000) |
Working through the numbers
- £300,000 estate, no home to descendants: fully covered by the £325,000 nil-rate band on its own. No Inheritance Tax.
- £500,000 estate, home left to children: the £175,000 residence band on top of the £325,000 nil-rate band covers it — £500,000 available against a £500,000 estate. No tax.
- £920,000 estate, second death of a couple with full transfer: using both spouses' nil-rate and residence bands (see our worked second-death example), £1,000,000 is available — still comfortably covers this estate.
- £1,600,000 estate, single person: below the £2,000,000 taper threshold, so the full £500,000 threshold applies. The taxable slice is £1,100,000 , taxed at 40%.
- £2,400,000 estate: comfortably over the £2,000,000 taper threshold, so the residence band has tapered away to close to nil, leaving only the £325,000 nil-rate band. The taxable slice jumps to £2,075,000.
The 36% charity option
On the largest estate above, gov.uk's reduced-rate rule applies if 10% or more of the net estate goes to charity: the rate on the remaining taxable estate drops from 40% to 36%. Whether that's better for the family after the charitable gift is a genuine, estate-specific calculation — not automatically a win, but worth running for any estate close to or above £2,000,000.
Why the same net worth can produce very different bills
Two families with an identical net worth can end up owing very different amounts, purely because of how the estate is structured. A single person with everything in their own name and no children has only the ordinary £325,000 band; a married couple with a home destined for their children can access up to £1,000,000 on exactly the same total wealth. The gap between £325,000 and £1,000,000 isn't a loophole — it's simply which allowances an estate's circumstances happen to qualify for, which is why two seemingly similar estates in the news can generate very different headline figures.
What these examples leave out
Every row above assumes a clean estate: no earlier gifts within 7 years still counting against the nil-rate band, no business or agricultural relief, and a home genuinely passing to direct descendants for the residence band to apply. Lifetime gifts, trusts, and rental property (which gets no special relief — see our rental property guide) can all move these numbers. Run your own estate through the Inheritance Tax calculator for a figure that reflects your actual assets.
Who actually has to find the money
None of the figures above are paid by the people inheriting directly out of their own pocket before they receive anything — Inheritance Tax is a debt of the estate, settled by the personal representatives (the executor or administrator) before assets are distributed. gov.uk sets the deadline at six months after death, with land and buildings (including a rental portfolio) eligible for HMRC's yearly-instalments option over 10 years if selling quickly isn't realistic. See our Inheritance Tax on property hub for exactly how that payment and instalment process works, and what happens if the six-month deadline is missed.
This is a guide, not financial, tax or legal advice. Figures are estimates from the published rates and thresholds, which change with each Budget. Your own position depends on facts a guide can't see — check anything that matters against gov.uk guidance or a qualified adviser before you act on it.
gov.uk: Inheritance Tax (thresholds, 40% rate, 36% charity rate) · gov.uk: passing on a home · HMRC: residence nil-rate band (£2m taper), all read verbatim 11 Sep 2026. Estates used are illustrative, not real cases; rates and bands match site/taxdata.py's IHT dataset with no conflicts found.
Quick answers
Likely nothing, if the home passes to children or grandchildren — the combined £325,000 nil-rate band plus £175,000 residence band gives £500,000 tax-free, which covers a £500,000 estate in full.
Depends entirely on which thresholds are available. For a single person with the home going to children, £500,000 is tax-free and the remaining £500,000 is taxed at 40% — roughly £200,000. For a couple using both transferred allowances, the whole £1,000,000 is very close to fully covered.
The standard rate is 40% on the taxable slice of an estate above the available thresholds — there's no higher band above that. A reduced 36% rate applies on the whole taxable portion if 10% or more of the net estate is left to charity.
Only the amount above your available threshold. gov.uk states the rate “is only charged on the part of your estate that's above the threshold” — everything up to the threshold passes with no Inheritance Tax at all.
Sources
The primary documents this page is built from. Links checked 5 September 2026.
- Inheritance Tax — GOV.UK
- Inheritance Tax: passing on a home — GOV.UK
- Inheritance Tax: Residence Nil Rate Band — GOV.UK / HMRC
- Rates and allowances: Inheritance Tax thresholds and interest rates — GOV.UK / HMRC