How the £800,000 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 £800,000 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 | £475,000 | £190,000 | 23.8% |
| Single, home left to children | £500,000 | £300,000 | £120,000 | 15.0% |
| 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.
£800,000 and the widening gap between scenarios
At £800,000 the three standard scenarios produce three very different bills: £120,000 for a single homeowner leaving the property to children, £190,000 with no residence band, and zero for a widowed second death with full transferred allowances. The single/married gap has grown to nearly £200,000 — the tax system's largest implicit subsidy for marriage and civil partnership.
This is also the level where people start eyeing their pension as a shelter. Defined-contribution pensions have historically sat outside the estate, but that door is closing: from 6 April 2027, unused pension funds and death benefits count as estate assets for IHT (legislated in the Finance Act 2026). Estates around £800,000 that relied on a large untouched pension to stay under the thresholds should re-run their numbers on the post-2027 rules.
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 — which is why the couple's bill on this page (£0) differs so much from the single figure (£120,000). 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 £47,500 donation would cut the tax from £190,000 to £153,900 — the charity receives £47,500 while your other beneficiaries give up only £11,400. 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 £800,000 estate?
It depends on who inherits. A single person leaving a home to children or grandchildren pays £120,000 (allowances of £500,000). Without the residence nil-rate band the bill is £190,000. 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 →