Every estate has a basic threshold. Leaving a home to your children or grandchildren adds a second one — but only up to the value of the home. A flat worth £100,000 adds £100,000 of threshold, not the full amount.

⚠ Then it is taken away again

Above a £2 million estate the residence threshold is withdrawn by £1 for every £2 over. It is gone entirely £350,000 later.

That creates a band nobody plans for. Each extra £2 of estate is taxed at 40% and removes £1 of threshold, which is then taxed as well — £1.20 of tax on £2, an effective 60%. It is the same shape as the 60% Income Tax band between £100,000 and £125,140, and just as invisible in the headline rate.

The taper looks at the whole estate, not the home. Assets that have nothing to do with property can withdraw the property allowance.

Transfers between spouses

Anything unused when the first of a couple dies passes to the survivor, so both thresholds can double. ⚠ This calculator assumes a full transfer. Partial transfers are common and are carried as a percentage of the band in the year of the first death, not as a cash amount — a real case needs those figures.

What this does not cover

Gifts made in the seven years before death and the taper relief on them, trusts, business or agricultural relief, downsizing additions where a home was sold before death, non-residents, and the rules for direct descendants who are not children or grandchildren. It assumes the estate is settled at current thresholds.

Where these figures come from

Every threshold is read from a dated rate file rather than written into the page, and each entry records the gov.uk page it came from. See Inheritance Tax thresholds, the residence nil rate band and Inheritance Tax on gov.uk.