Estimate US federal estate tax or UK inheritance tax with spouse, charity, gifts, residence band, portability, and planning adjustments.
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Estate tax — known as inheritance tax in the UK or death duty in some countries — determines how much of your wealth can be passed on to your loved ones and how much goes to the government when you die. For most people the answer is straightforward: nothing, because their estate falls well below the exemption thresholds. But for those whose estates approach or exceed those thresholds, understanding the rules, rates, and planning strategies is one of the most financially significant things they can do.
This page covers everything you need to calculate and understand estate tax liability in the United States (federal and state level), the United Kingdom, and across Europe — using the latest 2025 and 2026 rates and exemptions. We explain the formulas, work through real examples, and outline the key planning strategies used to reduce or eliminate estate tax exposure legally.
An estate tax is a tax levied by a government on the total value of a deceased person's estate — their property, money, investments, and other assets — before those assets are distributed to heirs. The tax is paid by the estate itself, not by the people who inherit. This distinguishes it from an inheritance tax, which is paid by the person who receives the assets, not by the estate.
In the United States, the federal government imposes an estate tax. Twelve states and Washington D.C. also levy their own state-level estate taxes, often with much lower exemption thresholds than the federal government. Six US states impose a separate inheritance tax on beneficiaries. Some states impose both.
In the United Kingdom, the equivalent is called Inheritance Tax (IHT), which is technically an estate tax — it is paid by the estate before assets pass to beneficiaries. Across Europe, the terminology and structure vary considerably by country.
The federal estate tax is the most significant wealth transfer tax in the United States. The good news for most Americans is that the exemption threshold is extremely high — the vast majority of estates will never owe a single dollar of federal estate tax.
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, permanently extended and increased the elevated estate tax exemption, setting it at $15 million per individual for 2026, indexed for inflation going forward. This was a significant change — without this legislation, the exemption would have reverted to approximately $7 million in 2026 as the temporary TCJA provisions expired.
Federal estate tax is calculated on a tiered bracket system — similar to income tax. Only the amount above the exemption is taxable, and even then, it is taxed progressively across brackets. The maximum rate of 40% applies only to amounts more than $1 million above the exemption threshold.
An individual dies in 2026 with a gross estate valued at $16.5 million. They made no taxable lifetime gifts. Their spouse predeceased them 10 years ago with an unused exemption of $13 million (portability was elected).
This example illustrates why portability — electing to transfer an unused exemption from one spouse to the other — is one of the most powerful estate tax planning tools available to married couples. Always file IRS Form 706 to elect portability even when no tax is due.
Use our Estate Tax Calculator to model your own federal estate tax scenario with today's exemption amounts.
State-level estate and inheritance taxes can catch many people off-guard. Your estate may be entirely below the $15 million federal threshold but still liable for state estate tax if you live in a state with a much lower exemption. As of 2026, twelve states and Washington D.C. impose their own estate tax.
Five states impose an inheritance tax paid by the beneficiary, not the estate. Iowa eliminated its inheritance tax effective January 1, 2025.
Pennsylvania is particularly notable — children who inherit from a parent pay a 4.5% inheritance tax, which can be significant on large estates. This catches many Pennsylvania families by surprise.
UK Inheritance Tax is charged on the estate of anyone who dies domiciled in the United Kingdom with a net estate above their available nil-rate band. Despite the name, it functions as an estate tax — the estate pays it before assets are distributed to beneficiaries. It is administered by HMRC and must be paid within 6 months of the end of the month of death.
Unlike the US which uses tiered brackets, UK IHT is charged at a flat rate of 40% on the value of the estate above the available nil-rate band. There is one exception: if 10% or more of the net estate is left to qualifying charities, the IHT rate on the remaining taxable estate drops to 36%.
The Residence Nil-Rate Band is reduced by £1 for every £2 that the net estate exceeds £2 million. For a single individual, this means the RNRB is completely eliminated when the estate exceeds £2.35 million (£2m + (£175,000 × 2)). For a married couple using both RNRBs, the RNRB is fully eliminated when the second estate exceeds £2.7 million.
Use our UK Inheritance Tax Calculator to calculate your IHT position including NRB, RNRB, taper, and spouse allowance transfer.
One of the most powerful and widely used methods of reducing UK IHT is making gifts during your lifetime. The key principle is that gifts made more than seven years before death are generally exempt from IHT — they fall outside the estate entirely. Gifts made within seven years are subject to taper relief on a sliding scale.
Larger gifts made to individuals — called Potentially Exempt Transfers (PETs) — are fully exempt from IHT if the donor survives for at least seven years after making the gift. If the donor dies within seven years, the gift is counted back into the estate. However, if the death occurs between 3 and 7 years after the gift, taper relief reduces the IHT payable on that gift:
The US federal gift tax works in tandem with the estate tax through the unified gift and estate tax exemption. The gift tax prevents wealthy individuals from giving away all their assets during their lifetime to avoid estate tax at death. The two taxes share the same lifetime exemption — any taxable gifts made during life reduce the estate tax exemption available at death.
Every individual can give up to $19,000 per recipient per year in 2025 and 2026 without any gift tax consequences and without using any lifetime exemption. Married couples can split gifts, effectively doubling this to $38,000 per recipient per year. There is no limit on the number of recipients.
Gifts above the annual exclusion are not necessarily immediately taxed — they count against your $15 million lifetime exemption. You only begin paying gift tax when you have used the entire lifetime exemption through taxable gifts.
Inheritance and estate tax rules across Europe vary enormously by country. Some nations — including Sweden, Portugal, and Austria — have abolished inheritance tax entirely. Others, such as Belgium and France, apply significant rates with relatively low thresholds. Understanding the rules of the relevant country is essential for anyone with cross-border assets or family.
Estate tax planning is the process of legally arranging your affairs so that the maximum amount of your wealth passes to the people and causes you care about rather than to the government. The following strategies are widely used by individuals and families with significant assets on both sides of the Atlantic.
Giving $19,000 per year to each of your children, grandchildren, and other intended beneficiaries removes assets from your estate without touching your lifetime exemption. A couple with three adult children and six grandchildren can transfer $342,000 per year completely gift-tax-free ($19,000 × 2 spouses × 9 recipients).
When the first spouse dies, always file IRS Form 706 to elect portability — even if no estate tax is due. This transfers any unused exemption to the surviving spouse, potentially doubling their available exemption to $30 million.
Life insurance proceeds are generally included in the taxable estate if the deceased owned the policy. By placing a life insurance policy inside an irrevocable life insurance trust, the proceeds fall outside the estate — providing heirs with liquidity to pay any estate tax bill while keeping the payout estate-tax-free.
A CRT allows you to donate appreciated assets to a trust, receive an immediate income stream for life or a term of years, claim a partial charitable deduction, and transfer remaining assets to charity at the end. The assets placed in the CRT are removed from your taxable estate.
Investing capital gains in a Qualified Opportunity Fund can defer and potentially reduce capital gains tax and, if held long enough, reduce the size of the taxable estate through appreciation occurring within the QOZ investment structure.
Using the £3,000 annual gift exemption every year (carrying forward one year if unused) removes money from the estate immediately without any IHT exposure. A couple who consistently uses both allowances can remove £6,000 per year from their combined estate without any planning complexity.
The exemption for regular gifts out of income is unlimited but strictly interpreted by HMRC. The payments must come from income (not capital), must be part of a habitual pattern, and must not affect the donor's standard of living. Properly documented, this can be one of the most tax-efficient ways to pass wealth — a person with £20,000 of surplus income per year can potentially pass £140,000 in seven years entirely exempt from IHT.
Qualifying business assets held for at least two years before death attract 100% BPR relief — they fall completely outside the taxable estate. From April 2026, BPR is capped at 100% for the first £1 million of qualifying assets, with 50% relief above that level. Business owners with large business interests should review their planning before this change takes full effect.
Qualifying agricultural property similarly attracts 100% IHT relief for the first £1 million from April 2026, with 50% relief above. This is a critical planning consideration for farming families following the Autumn 2024 Budget changes.
Currently, pension funds fall outside your estate for IHT purposes. From April 2027, inherited pension pots will be included in the estate calculation. Individuals with large pension pots should review their estate planning strategy before this change takes effect, as pensions have been one of the most powerful (and currently underused) estate planning tools.
Various trust structures — including discretionary trusts, loan trusts, and gift and loan plans — can be used to pass assets outside the estate while retaining some control or access. Discretionary trusts face a periodic charge of up to 6% every ten years on assets above the nil-rate band, plus an exit charge. Despite these charges, trusts often remain beneficial for larger estates, particularly where control or protection of beneficiaries is a concern.
One of the most common misconceptions about estate tax is what actually counts. Your taxable estate is broader than most people initially expect.
Estate planning connects with a wide range of financial decisions. These tools will help you build a complete financial and tax picture:
The federal estate tax exemption for 2026 is $15 million per individual and $30 million for married couples. This was set by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, which permanently increased and indexed the exemption for inflation. Estates below these thresholds owe no federal estate tax. Only the amount above the exemption is subject to tax, starting at 18% and reaching a maximum rate of 40% on amounts more than $1 million above the exemption threshold.
The federal estate tax exemption in 2025 was $13.99 million per individual ($27.98 million for married couples using portability). The 2026 increase to $15 million was a result of the OBBBA legislation which permanently extended the elevated exemption amounts originally introduced by the Tax Cuts and Jobs Act of 2017.
In the UK, the standard nil-rate band is £325,000 per individual for 2025/26 and 2026 — frozen at this level since 2009 and confirmed to remain frozen until at least 2030/31. If you own a home and leave it to direct descendants (children, grandchildren), you can add the Residence Nil-Rate Band of £175,000, giving a total tax-free threshold of £500,000. Married couples and civil partners can combine their allowances, potentially sheltering up to £1 million from IHT. IHT is charged at 40% on the estate above the available threshold.
Yes — they are paid by different parties. Estate tax is paid by the deceased's estate before assets are distributed to heirs. Inheritance tax is paid by the individual who receives the inheritance, after distribution. In the US, the federal government and twelve states impose an estate tax, while six states impose an inheritance tax on beneficiaries. In the UK, Inheritance Tax is technically an estate tax despite its name — it is paid by the estate before beneficiaries receive anything.
No — the vast majority of Americans will never pay federal estate tax. With the 2026 exemption at $15 million per individual and $30 million for married couples, only a very small fraction of estates — historically well under 1% — are large enough to trigger any federal estate tax liability. However, state estate taxes can apply at much lower thresholds, particularly in states like Massachusetts ($2 million), Oregon ($1 million), and Washington State ($2.19 million).
The Residence Nil-Rate Band (RNRB) is an additional £175,000 tax-free allowance available when you leave your main home (or a share of it) to direct descendants — defined as children, stepchildren, adopted children, foster children, or their lineal descendants (grandchildren, great-grandchildren). The RNRB starts to be withdrawn for estates worth more than £2 million, reducing by £1 for every £2 above that threshold. For a single person, the RNRB is completely eliminated when the estate exceeds £2.35 million. Unused RNRB can be transferred to a surviving spouse or civil partner.
Portability is a provision that allows a surviving spouse to inherit any unused federal estate tax exemption from their deceased spouse. For example, if one spouse dies in 2026 with a $15 million exemption but only used $3 million of it, the surviving spouse can inherit the remaining $12 million of unused exemption — in addition to their own $15 million — giving them a total exemption of $27 million. Portability must be elected by filing IRS Form 706 (the estate tax return) within the filing deadline, even if no tax is owed.
In the UK, gifts to individuals (called Potentially Exempt Transfers or PETs) become fully exempt from IHT if the donor survives for at least seven years after making the gift. If the donor dies within seven years, the gift is added back into the estate for IHT purposes. Between 3 and 7 years, taper relief reduces the IHT payable on the gift — from 32% at 3–4 years to just 8% at 6–7 years. After 7 years, the gift is entirely outside the estate and attracts no IHT at all.
Currently, pension funds fall outside the UK estate for IHT purposes — making them one of the most tax-efficient assets to accumulate for estate planning. However, the UK government announced in the Autumn 2024 Budget that inherited pension pots will be included in the IHT calculation from April 2027. Anyone with a large pension fund should review their estate planning well in advance of this date, as the rules are changing significantly.
The majority of US states — 38 states as of 2026 — have no state estate tax or inheritance tax. These include major states such as California, Florida, Texas, Arizona, Nevada, Georgia, Ohio, and North Carolina. If you live in one of the 12 states or Washington D.C. with an estate tax, or one of the 5 states with an inheritance tax, you may have a state-level tax liability even if your estate is below the federal threshold.
New York's estate tax has an unusual "cliff" feature. If an estate exceeds the New York exemption threshold ($7.16 million in 2026) by more than 5%, the entire estate — not just the amount above the exemption — becomes taxable at New York rates. This means an estate valued at $7.52 million in New York (just 5.1% above the threshold) could face a larger tax bill than one valued at $7.5 million. This makes planning around the New York threshold particularly important for affected families.
Yes — various trust structures can be used to reduce IHT exposure. Discretionary trusts allow assets to be held outside the estate for IHT purposes, though they face a periodic charge of up to 6% every ten years on assets above the nil-rate band, plus exit charges when assets leave the trust. Bare trusts (such as those used for children's savings) count as Potentially Exempt Transfers and become fully exempt if the donor survives seven years. Life insurance written in trust removes the policy proceeds from the estate entirely. Trust planning is complex and always requires advice from a qualified solicitor or financial adviser.
Dying without a will — called dying intestate — does not directly change how much estate or inheritance tax is owed, as tax is calculated on the total estate value regardless. However, it does affect who receives the assets, as intestacy rules determine distribution rather than your wishes. Crucially, assets may not be distributed in the most tax-efficient way — for example, assets might pass to non-spouse beneficiaries who are subject to IHT, whereas leaving the same assets to a spouse would be completely tax-free. Always have an up-to-date will that reflects both your personal wishes and your tax planning strategy.
Estate tax is one of the few taxes you can often legally and legitimately minimise through advance planning. In both the United States and the United Kingdom, the rules provide meaningful tools — annual gift exclusions, spousal exemptions, business reliefs, charitable giving incentives, and trust structures — that allow most families to significantly reduce or eliminate their estate tax exposure when used thoughtfully over time.
The starting point is always understanding your current position: how large is your estate, what exemptions are available to you, what might your tax liability be if you died today, and what strategies make sense for your personal situation. Our estate tax and inheritance tax calculators give you that starting point in minutes.
From there, working with a qualified estate planning attorney, solicitor, or financial adviser to implement the right strategy for your specific circumstances is the most important investment you can make in your family's financial future.
All estate tax calculators and content on FreeUSUKCalculator.com are provided for educational and informational purposes only. Tax rates, exemption thresholds, and legislation change regularly — always verify current figures with official sources (IRS.gov for US federal tax, GOV.UK for UK IHT). State estate and inheritance tax rules vary significantly and are subject to legislative change. European inheritance tax rules vary by country, region, and individual circumstance. Nothing on this page constitutes legal, tax, financial, or estate planning advice. Estate planning decisions should always be made in consultation with a qualified estate planning attorney, solicitor, chartered accountant, or regulated financial adviser who can assess your personal circumstances. The calculations and examples provided are illustrative only and may not reflect your actual tax liability.
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Only estates worth more than the federal exemption owe estate tax — that exemption is in the multi-million-dollar range (around $13.6 million per person in 2024). The vast majority of estates fall well below it and owe nothing.
Estate value above the exemption is taxed on a sliding scale that tops out at 40%. The calculator applies the bracket structure to the taxable portion above the exemption.
Estate tax is paid by the deceased's estate before assets are distributed; inheritance tax (charged by a handful of US states) is paid by the people who receive the assets. The federal government levies estate tax, not inheritance tax.
Transfers to a US-citizen spouse are generally exempt under the unlimited marital deduction, and a surviving spouse can often use the deceased spouse's unused exemption (portability).