Inheritance Tax on a £3,000,000 Estate: Married couple, home to children
For a £3,000,000 estate (married couple, home to children), the tax-free threshold is £650,000. Inheritance Tax at 40% on the £2,350,000 above it comes to £940,000, leaving £2,060,000 for the beneficiaries.
| Estate value | £3,000,000 |
| Nil-rate band | £650,000 |
| Residence nil-rate band | £0 |
| Total tax-free threshold | £650,000 |
| Taxable estate | £2,350,000 |
| Inheritance Tax at 40% | £940,000 |
| Estate after tax | £2,060,000 |
| Tax as a share of the estate | 31.33% |
How this is worked out
Inheritance Tax is charged at 40% on the part of an estate above the tax-free threshold. The nil-rate band is £325,000 per person, and a surviving spouse or civil partner can add the unused band of the first to die, so this example uses £650,000.
The residence nil-rate band of £350,000 is reduced by £1 for every £2 the estate is worth above £2 million, which leaves £0 here.
Assumptions: no lifetime gifts in the previous 7 years, no reliefs such as Business or Agricultural Relief, no reduced 36% rate for charity gifts, and an estate value net of debts.
Sources: How Inheritance Tax works (GOV.UK), Inheritance Tax: passing on a home (GOV.UK), Inheritance Tax: residence nil rate band (GOV.UK)