How the £400,000 bill is worked out
Inheritance tax is charged at 40% on the part of an estate above the tax-free allowances. Everyone gets a nil-rate band of £325,000 (unchanged since 2009), and a home left to children or grandchildren adds a residence nil-rate band of £175,000. Both are 2025/26 figures and frozen — the Autumn Statement 2025 extended the freeze to 2030/31 — and the RNRB tapers away for estates over £2 million (GOV.UK / M&G adviser guidance). For a £400,000 estate the three standard situations look like this:
| Scenario | Tax-free allowance | Taxable amount | IHT due (40%) | Effective rate |
|---|---|---|---|---|
| Single, no home to descendants | £325,000 | £75,000 | £30,000 | 7.5% |
| Single, home left to children | £500,000 | £0 | £0 | 0.0% |
| Widowed second death, full transferred allowances | £1,000,000 | £0 | £0 | 0.0% |
Assumes the home is worth at least the residence band, passes outright to direct descendants, no gifts in the previous 7 years and no reliefs. For your own numbers use our interactive inheritance tax calculator.
Does a £400,000 estate even pay inheritance tax?
Often, no. A £400,000 estate is only £75,000 over the basic £325,000 nil-rate band, and if that £75,000 is covered by a home passing to children or grandchildren, the residence nil-rate band wipes the bill out entirely. The people who do pay at this level are typically renters or those leaving everything to siblings, nephews or friends — the RNRB only applies to direct descendants, so their heirs face £30,000 of tax that a neighbour's children would not.
The bigger story at £400,000 is drift. The £325,000 nil-rate band has not moved since 2009 and is now frozen into the next decade, while asset prices have kept rising. An estate comfortably under the threshold ten years ago can be over it today without its owner ever feeling wealthy. If your estate is near this level, the fix is usually cheap: check the will directs the home to direct descendants, and the problem often disappears.
Married couples and civil partners
Nothing passing between spouses or civil partners is taxed, whenever it happens. More importantly, whatever fraction of the £325,000 and £175,000 bands the first death leaves unused transfers to the survivor. A couple who simply leave everything to each other and then to the children therefore arrive at the second death with up to £1,000,000 of allowances — double the single person's headroom, which is why estates at this level stay comfortably tax-free for couples and why the marriage exemption matters so much further up the scale. Unmarried partners receive neither the exemption nor the transfer, regardless of how long they have been together.
Ways to shrink the bill
Gifts and the 7-year rule. Assets given away more than seven years before death leave the estate entirely; between three and seven years, taper relief reduces the tax charged on the gift itself. Smaller reliefs work immediately: £3,000 a year of exempt gifts, £250 small gifts per recipient, wedding gifts, and — most underused — regular gifts out of genuine surplus income.
The 36% charity rate. Leave at least 10% of your net estate to charity and the IHT rate on the rest drops from 40% to 36%. On this estate (taking the simple no-RNRB case), a £7,500 donation would cut the tax from £30,000 to £24,300 — the charity receives £7,500 while your other beneficiaries give up only £1,800. The taxman funds most of the gift.
Pensions — the rules change in April 2027. Unused pension funds and death benefits currently sit outside most estates, but from 6 April 2027 they are included for IHT (legislated in the Finance Act 2026). If your estate plan leans on a large untouched pension, re-run the numbers on the new basis — our pension pot income pages cover the drawdown side.
Frequently asked questions
How much inheritance tax is due on a £400,000 estate?
It depends on who inherits. A single person leaving a home to children or grandchildren pays £0 (allowances of £500,000). Without the residence nil-rate band the bill is £30,000. On a widowed second death with full transferred allowances it is £0. Rates and bands are 2025/26 and frozen.
Do I pay inheritance tax if everything goes to my spouse?
No. Transfers between spouses and civil partners are exempt from IHT entirely, and any unused nil-rate band and residence nil-rate band transfer to the survivor — giving the couple up to £1,000,000 of combined allowances on the second death.
What is the residence nil-rate band?
An extra £175,000 allowance (2025/26, frozen) available when a home you lived in passes to direct descendants — children, grandchildren, step and adopted children. It is capped at the home's value and tapers away at £1 for every £2 the estate exceeds £2 million.
Can I reduce the bill by giving money away?
Yes. Gifts made more than 7 years before death fall out of your estate completely. You also get a £3,000 annual gift exemption, and regular gifts out of surplus income are exempt immediately. Leaving 10% of the net estate to charity cuts the IHT rate on the rest to 36%.
Model your own estate, gifts and reliefs
Inheritance tax calculator →