UK Inheritance Tax Calculator 2026/27

How the calculation works

1. Nil-Rate Band (NRB) = £325,000 + any unused % transferred from a late spouse or civil partner (max another £325,000).
2. Residence Nil-Rate Band (RNRB) = £175,000 + any transferred spouse RNRB (max another £175,000). Applies only if the main residence passes to a direct descendant.
3. RNRB taper: if the gross estate exceeds £2,000,000, the RNRB reduces by £1 for every £2 above. A single estate loses the full £175k at £2.35m; a couple's combined £350k at £2.7m.
4. Charity legacy is always fully exempt. If it's ≥10% of the net estate (estate − NRB − RNRB), the reduced 36% rate applies to the rest; otherwise 40%.
5. IHT due = (estate − NRB − RNRB − charity) × applicable rate.

Autumn Budget 2024 — what changed for 2026/27

• APR & BPR £2.5m cap (from 6 April 2026): 100% Agricultural Property Relief and Business Property Relief is capped at a combined £2.5m (raised from the originally proposed £1m). Above the cap, relief drops to 50%. Specialist territory — farmers and business-owners should consult an IHT adviser.
• Pensions into the estate (from 6 April 2027, NOT 2026/27): most unused pension funds and death benefits will count toward IHT. A huge estate-planning change, but does not affect 2026/27 calculations — this tool follows the rules in force today.
• Thresholds frozen to April 2031 (extended at Autumn Budget 2025): NRB £325k and RNRB £175k locked in since 2020. Fiscal drag means more estates are being caught each year as asset prices rise — 2026/27 is no exception.

Pensions in the estate from 6 April 2027

Finance Act 2026 (sections 66 to 71, Royal Assent 18 March 2026) brings most unused pension funds and pension death benefits into the value of the estate for Inheritance Tax, for deaths on or after 6 April 2027. This calculator follows the rules in force today, so nothing below is modelled above - it is here because the planning decisions start now. HMRC's Technical Note 2 of 27 August 2026 set out the mechanics.

What stays outside the charge

HMRC calls these "excluded benefits" and they are not part of the "notional pension property" that enters the estate:

• Death-in-service lump sums paid from a registered pension scheme. This is the exclusion most often missed. In HMRC's Example 7 a member holds a £200,000 employment-related money purchase pot carrying a death-in-service benefit of 2.5 times his £65,000 salary, and that scheme's notional pension property is still calculated as £200,000 - the death-in-service benefit is simply not added. (His total across both of his schemes in that example is £300,000, because a second, non-employment pot contributes a further £100,000.)
• Dependants' scheme pensions, but only where the benefit can only be payable as an excluded benefit (section 150A(6) IHTA 1984). If the beneficiary had the choice of another kind of death benefit - for example using the funds to buy a dependants' annuity - it is not excluded, even if they go on to take the scheme pension. The rate does not have to stay constant: a dependant's scheme pension later reduced can still be excluded if the other statutory conditions are met.
• Dependants' and nominees' annuities purchased together with the member's lifetime annuity, and trivial commutation lump sums from a commuted dependant's pension.

Death in deferment is the trap. Where the member dies as a deferred member rather than in service, lump sum death benefits will not normally qualify as a death-in-service benefit and so are in scope. Someone who left active service under a redundancy package may still count as employed for this purpose if the package or scheme rules say so.

Who pays, and how the money moves

• Personal representatives report and pay, but anyone receiving benefits derived from the notional pension property is jointly liable with them for the Inheritance Tax attributable to those benefits. Spouse, civil partner and charity exemptions apply to pension benefits as they do to the rest of the estate.
• Scheme administrators must supply the value of the notional pension property within 28 days of receiving a request from the personal representative (SI 2026/818, amending SI 2006/567). The later-of-28-or-14-days clock applies to the exempt-beneficiary proportion and to the "further information" stage, not to the value itself.
• A withholding notice lets a personal representative have the scheme hold back 50% of the pension death benefit entitlement payable to a person - that is, the value of the notional pension property held in that scheme, leaving out excluded benefits and benefits going to exempt beneficiaries. It lapses when the Inheritance Tax and any interest is paid, when it is withdrawn, or 15 months after the end of the month of death, whichever is first.
• The Pensions Direct Payment Scheme lets the tax be paid to HMRC straight from the pension. Minimum £1,000 per notice, and the administrator has 35 days from a valid notice to pay. An administrator that ignores one becomes jointly liable under section 210(3)(b)(ii) IHTA 1984.
• Clearance is applied for on form IHT30, once the Inheritance Tax account has been delivered and the personal representatives believe all the tax is paid and the estate values are final - in practice not before both at least 12 months have passed since the death and at least 3 months since the unique code for probate was received. After clearance, liability for a pension benefit that surfaces later sits with the beneficiaries rather than the executors.