This tool provides a quick way to calculate how much inheritance tax your heirs are likely to have to pay when they inherit your estate.
Inheritance tax calculator
How to use this calculator
Enter the value of your main residence, and tick the “yes” or “no” boxes below to indicate whether or not you’re planning to leave the property to direct descendants, as it has a bearing on the inheritance tax (IHT) bill. Direct descendants include relatives such as children, grandchildren, step-children, but not nieces, nephews or cousins.
In the box below, enter the value of the rest of your estate – including savings, investments, properties that aren’t your main residence (such as buy-to-lets or holiday homes), and any other valuables.
The final box is for your donation to charity, if you’re making one.
How it works (methodology)
This calculator applies your estate information and inheritance plans to calculate your probable IHT bill.
It assumes you’re an individual who only has your own allowances to offset inheritance tax – however, if you’ve already inherited your spouse’s allowances then you may have a larger tax-free threshold.
For estates above £2m, the extra residence nil-rate band is reduced by £1 for every £2 over the threshold.
For any estate value over the tax-free allowance, the tool calculates a tax charge of 40pc. However, if you plan to leave more than 10pc of your estate to charity this is reduced to 36pc.
What is this calculator useful for?
This calculator can help give an indication of how much money may be taken out of your estate to pay for IHT.
If it’s a large amount, you might want to do some inheritance tax planning to reduce it – such as making sure your main residence is left to direct descendants (as the £175,000 residence nil-rate band is added to the main £325,000 tax-free allowance), and making tax-free gifts while you’re still alive – subject to the “seven-year rule”.
If you hadn’t planned on leaving a charitable donation, you might choose to do so, since you’ll pay a reduced rate of 36pc (rather than 40pc) if you leave at least 10pc of your estate to charity.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
