IHT on £900,000 Estate — Single + Residence NRB
Single Person (leaving home to children). Based on 2025-26 nil-rate band rules.
IHT calculation breakdown
| Total estate value | £900,000 |
| Nil-Rate Band (NRB) | - £325,000 |
| Residence Nil-Rate Band (RNRB) | - £175,000 |
| Total threshold | £500,000 |
| Taxable estate (above threshold) | £400,000 |
| IHT rate | 40% |
| IHT payable | £160,000 |
| Net estate to beneficiaries | £740,000 |
Ways to reduce this IHT bill
- Use the £3,000 annual gift exemption — gifts up to £3k per year are immediately exempt
- Make potentially exempt transfers (PETs) — larger gifts are exempt if you survive 7 years
- Leave 10% or more to charity — reduces IHT rate from 40% to 36%
- Hold qualifying business assets — Business Property Relief (BPR) can eliminate IHT on them
- Review your pension — most pensions sit outside the estate and are not subject to IHT
- Consider life insurance written in trust to cover the IHT bill without adding to the estate
Frequently asked questions
How much IHT is due on a £900,000 estate?
IHT of £160,000 is payable. The taxable portion is £400,000 — the £900,000 estate minus the £500,000 threshold — taxed at 40%. Beneficiaries receive £740,000 (82% of the estate).
What is the IHT nil-rate band in 2025-26?
The standard nil-rate band (NRB) is £325,000 per person, frozen until April 2028. If you are leaving the family home to direct descendants (children, grandchildren, or their spouses/civil partners), the residence nil-rate band (RNRB) adds a further £175,000. Married couples and civil partners can combine both allowances across both deaths, giving a total threshold of up to £1,000,000.
When does inheritance tax have to be paid?
IHT must be paid within 6 months of the end of the month of death. After this deadline, HMRC charges interest on unpaid tax. For property, executors can choose to pay in annual instalments over 10 years, but interest still accrues on the unpaid balance.
Can I reduce the IHT on my estate?
Yes — several legitimate strategies exist. The annual £3,000 gift exemption lets you give away money each year free of IHT. Larger gifts become exempt if you survive 7 years (the seven-year rule). Business Property Relief (BPR) can eliminate IHT on qualifying business assets. Leaving at least 10% of the net estate to charity reduces the IHT rate from 40% to 36%. Pension assets usually fall outside the estate and are not subject to IHT. Seeking advice from a qualified financial planner or solicitor is recommended for estates with complex assets.
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