Inheritance tax (IHT) calculator for 2024/25 and life insurance
By WeCovr
Inheritance Tax (IHT) is often viewed unfavourably, as it imposes up to a 40% tax on the assets your heirs inherit, even though these assets have already been taxed during your lifetime. This tax, with its relatively small allowances, can leave grieving families facing a significant financial burden at a difficult time. Each year, HMRC collects billions of pounds in inheritance tax in the UK, affecting tens of thousands of families when their loved ones pass away.
However, there are several strategies available to help reduce this inheritance tax burden on your family. Our calculator below can assist you in estimating the potential inheritance tax liability for your heirs. By entering your assets and any liabilities, the calculator will provide an estimate of your estate's worth and the possible inheritance tax it may incur.
The inheritance tax calculator uses the most up-to-date allowances for the current tax year, including the Residence Nil-Rate Band (RNRB). This allowance helps reduce the tax burden by allowing the transfer of a family home without incurring inheritance tax. It is important to understand that these calculations are based on individual circumstances. For couples, the tax exemptions can potentially double, provided both partners qualify for the Main Residence Nil-Rate Band of £175,000 and the standard Nil-Rate Band of £325,000.
For personalised guidance tailored to your specific tax situation, please consult a qualified tax adviser, as the information provided here is not intended to serve as professional tax advice.
If your estate exceeds £325,000, there are two primary strategies to potentially increase the threshold and avoid inheritance tax on a larger portion of your assets:
The Main Residence Nil-Rate Band
If you own a home and pass it on to direct descendants (such as children, stepchildren, grandchildren, etc.) as your main residence, you can benefit from the main residence nil-rate band. This is an additional allowance set at £175,000 for the 2024/25 tax year, which increases annually in line with inflation.
This allowance applies to all estates valued at less than £2 million. For estates valued above this threshold, the allowance reduces by £1 for every £2 over £2 million.
The Transferable Nil-Rate Band
Married couples/civil partners can take advantage of the transferable nil-rate band, allowing them to transfer their £325,000 nil-rate band to each other. In the event of the death of one partner, if the deceased leaves everything to the surviving partner, it potentially doubles the survivor’s nil-rate band to £650,000.
This means the surviving partner can leave assets worth £650,000 upon their death without incurring any inheritance tax.
Combined Nil-Rate Bands
For an individual, combining the main residence nil-rate band of £175,000 (for the 2024/25 tax year) with the standard nil-rate band of £325,000 allows you to leave up to £500,000 to direct descendants without any inheritance tax liability.
In a marriage/civil partnership, each partner has their own nil-rate band and main residence nil-rate band. The main residence nil-rate band can also be transferred between partners, potentially allowing a combined total of up to £1 million to be passed to direct descendants without incurring inheritance tax.
Now that you have a rough idea how much your heirs might have to pay in inheritance tax when you pass away, you may want to add at least that amount to your life insurance sum assured to help them cover at least that part.
Please note that this calculator doesn't account for any gifts made, which may lead to a higher inheritance tax bill if the giver passes away within If the giver were to die within seven years of giving a substantial gift, this could leave the person receiving the gift with an unexpected inheritance tax (IHT) bill.
Such gifts are called Gift Inter Vivos - as explained in our Life Insurance Terms article. Our life insurance advisers have life insurance products set up via trusts that helps deal with such inheritance tax liabilities, including those arising from gifts and inheritance.
If you'd like to get your free and no-obligation assessment of life insurance requirements and which life and critical insurance products and which providers can be most suitable for your circumstances, you can do so in less than 30 seconds.
Book a free consultation with one of our super-friendly experienced insurance advisers by filling in a quick form by tapping on the button below.
However, there are several strategies available to help reduce this inheritance tax burden on your family. Our calculator below can assist you in estimating the potential inheritance tax liability for your heirs. By entering your assets and any liabilities, the calculator will provide an estimate of your estate's worth and the possible inheritance tax it may incur.
The inheritance tax calculator uses the most up-to-date allowances for the current tax year, including the Residence Nil-Rate Band (RNRB). This allowance helps reduce the tax burden by allowing the transfer of a family home without incurring inheritance tax. It is important to understand that these calculations are based on individual circumstances. For couples, the tax exemptions can potentially double, provided both partners qualify for the Main Residence Nil-Rate Band of £175,000 and the standard Nil-Rate Band of £325,000.
For personalised guidance tailored to your specific tax situation, please consult a qualified tax adviser, as the information provided here is not intended to serve as professional tax advice.
Inheritance Tax Calculator
Value of your assets
Value of your home
£
Value of your savings (balance of bank accounts, etc)
£
Value of your investments (any shares, bonds, ISAs)
£
Value of your life insurance, not held in trust
£
Value of any business you own
£
Value of your liabilities
Mortgage
£
Other loans
£
Credit card balances
£
Hire purchase and any other debts
£
Additional information
How much are you planning to leave to any charities in your will?
£
Will you be leaving property to your direct descendants (children / stepchildren, grandchildren etc.)?
Enter your figures above and tap Calculate to estimate your potential inheritance tax
If your estate exceeds £325,000, there are two primary strategies to potentially increase the threshold and avoid inheritance tax on a larger portion of your assets:
The Main Residence Nil-Rate Band
If you own a home and pass it on to direct descendants (such as children, stepchildren, grandchildren, etc.) as your main residence, you can benefit from the main residence nil-rate band. This is an additional allowance set at £175,000 for the 2024/25 tax year, which increases annually in line with inflation.
This allowance applies to all estates valued at less than £2 million. For estates valued above this threshold, the allowance reduces by £1 for every £2 over £2 million.
The Transferable Nil-Rate Band
Married couples/civil partners can take advantage of the transferable nil-rate band, allowing them to transfer their £325,000 nil-rate band to each other. In the event of the death of one partner, if the deceased leaves everything to the surviving partner, it potentially doubles the survivor’s nil-rate band to £650,000.
This means the surviving partner can leave assets worth £650,000 upon their death without incurring any inheritance tax.
Combined Nil-Rate Bands
For an individual, combining the main residence nil-rate band of £175,000 (for the 2024/25 tax year) with the standard nil-rate band of £325,000 allows you to leave up to £500,000 to direct descendants without any inheritance tax liability.
In a marriage/civil partnership, each partner has their own nil-rate band and main residence nil-rate band. The main residence nil-rate band can also be transferred between partners, potentially allowing a combined total of up to £1 million to be passed to direct descendants without incurring inheritance tax.
Now that you have a rough idea how much your heirs might have to pay in inheritance tax when you pass away, you may want to add at least that amount to your life insurance sum assured to help them cover at least that part.
Please note that this calculator doesn't account for any gifts made, which may lead to a higher inheritance tax bill if the giver passes away within If the giver were to die within seven years of giving a substantial gift, this could leave the person receiving the gift with an unexpected inheritance tax (IHT) bill.
Such gifts are called Gift Inter Vivos - as explained in our Life Insurance Terms article. Our life insurance advisers have life insurance products set up via trusts that helps deal with such inheritance tax liabilities, including those arising from gifts and inheritance.
If you'd like to get your free and no-obligation assessment of life insurance requirements and which life and critical insurance products and which providers can be most suitable for your circumstances, you can do so in less than 30 seconds.
Book a free consultation with one of our super-friendly experienced insurance advisers by filling in a quick form by tapping on the button below.