Inheritance Tax · 2025/26
Inheritance Tax on a £400,000 Estate — UK 2025/26
On a £400,000 UK estate for 2025/26, inheritance tax (IHT) is £0 — an effective rate of 0.0% on the full estate. The combined allowances of £1,000,000 cover the first slice; the remaining £0 is taxed at 40%.
Allowance & Tax Breakdown
How UK inheritance tax works in 2025/26
UK inheritance tax is charged at 40% on the value of an estate above the available allowances. Every individual has a nil-rate band of £325,000 and, where a qualifying main residence is left to direct descendants, an additional residence nil-rate band of £175,000. Anything passing between spouses or civil partners is fully exempt, and any unused allowance on the first death transfers to the surviving spouse — so a couple can shelter up to £1,000,000 before IHT bites.
The RNRB starts to taper once the estate exceeds £2,000,000, losing £1 of allowance for every £2 of excess. On a £400,000 estate the excess over the taper threshold is £0, which reduces the couple's RNRB by £0 — leaving £350,000 of RNRB still available. Combined with the full £650,000 couple NRB, that gives a total tax-free allowance of £1,000,000.
A reduced rate of 36% applies where at least 10% of the net estate is left to charity — useful planning for larger estates such as this one. Lifetime gifts (Potentially Exempt Transfers) drop out of the estate after 7 years, with taper relief on tax due for gifts between 3 and 7 years old. Business and Agricultural Property Relief can also significantly reduce the bill on qualifying trading or farming assets.