Answers · UK 2025/26
How much Inheritance Tax is due on a £1,200,000 estate?
A £1,200,000 estate left to children with a qualifying home pays £280,000 Inheritance Tax in 2026/27 for a single person (£700,000 taxable above the £500,000 threshold). A married couple with a combined £1,000,000 threshold would pay £80,000 instead, on £200,000 taxable.
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Inheritance Tax in 2026/27 is charged at 40% on the value of an estate above the available nil rate bands. A single person has a standard nil rate band of £325,000, plus a residence nil rate band of £175,000 if a qualifying home passes to direct descendants, giving a combined threshold of £500,000. On a £1,200,000 estate, £700,000 exceeds this threshold, so a single person's estate would owe 40% x £700,000 = £280,000. Married couples and civil partners can transfer unused nil rate bands to the surviving spouse, doubling the combined threshold to £1,000,000 (since both the standard and residence bands can each be transferred). On the same £1,200,000 estate, only £200,000 would then exceed the doubled £1,000,000 threshold, giving a bill of 40% x £200,000 = £80,000 -- a saving of £200,000 compared with a single person's allowance. This large difference shows why estate planning for couples, including making full use of transferable nil rate bands, matters so much once an estate exceeds around £650,000 to £1,000,000. Options to reduce the bill further include lifetime gifting (potentially exempt transfers that fall outside the estate after seven years), leaving 10% or more to charity to cut the rate to 36%, and using trusts, though professional advice is essential at this level.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.