How much Inheritance Tax is due on a £700,000 estate?

Full answer

Inheritance Tax in 2026/27 is charged at 40% on the value of an estate above the available nil rate bands. Every individual has a standard nil rate band of £325,000, plus, if they own a home and leave it to direct descendants such as children or grandchildren, an additional residence nil rate band of £175,000, giving a combined threshold of £500,000. On a £700,000 estate with a qualifying home left to children, £200,000 exceeds this threshold, so Inheritance Tax of 40% x £200,000 = £80,000 is due. Without the residence nil rate band -- for example if there is no home, or it passes to someone other than a direct descendant -- only the £325,000 standard band applies, leaving £375,000 taxable at 40%, a bill of £150,000, which is £70,000 more. Married couples can transfer any unused nil rate band to their surviving spouse, taking the combined threshold to £1,000,000, so a £700,000 estate left entirely to a surviving spouse first would be completely exempt (spousal transfers are always exempt), with Inheritance Tax only becoming relevant on the second death depending on the size of the combined estate at that point. Gifts made more than seven years before death are usually outside the estate entirely under the potentially exempt transfer rules. Use the Inheritance Tax calculator to model your estate and available reliefs.

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More answers

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