How the calculator works it out
- The estate. The home, savings, investments and anything else, less the mortgage and other debts. For deaths from 6 April 2027, unused pension pots are added.
- The tax-free bands. Everyone has a £325,000 nil-rate band. If the home goes to children or grandchildren there is a further residence band of up to £175,000. A widow or widower adds whatever share of their late partner’s bands was unused, so up to £1 million in all.
- The £2 million taper. The residence band shrinks by £1 for every £2 the estate is worth over £2 million. From April 2027 the pension counts towards that £2 million.
- Gifts. A large gift in the last seven years uses up the nil-rate band first. If it is bigger than the band, the excess is taxed on a sliding scale once it is more than three years old.
- The rate. 40% on everything above the bands, or 36% if at least a tenth of the estate goes to charity.
Anything left to a husband, wife or civil partner is free of tax, so on a first death the bill is usually nothing. The bill that matters for most families comes on the second death, which is why the calculator asks how much a late partner left to you.
The guide to inheritance tax on pensions from April 2027 works through three full examples, including a couple whose pension pushes them past £2 million and adds £240,000 to the bill.
What the calculator does not do
It does not cover business or agricultural relief, trusts already set up, foreign assets, or the detail of gifts year by year. It assumes the home goes outright to children or grandchildren when you say it does. For an exact answer on your own estate, an adviser authorised by the Financial Conduct Authority or a solicitor can advise; The House Plan gives you your figures and a will drafted to keep the bands.