How Much Inheritance Tax Do £2m, £5m and £10m Estates Pay? Worked Examples

• A £2 million estate with no relievable assets can still pay tax, because the residence nil-rate band starts tapering at exactly that value.
• A £5 million estate with a £2 million qualifying business can shelter that business value under the £2.5 million Business Relief and Agricultural Relief allowance.
• A £10 million estate with the same £2 million business gets no more relief on the business than the £5 million estate did.
• Every £2 of estate value above £2 million costs £1 of residence nil-rate band, regardless of what the extra value consists of.
• The £2.5 million Business Relief and Agricultural Relief allowance does not grow with the size of your estate.

Chargeable estate. The value of an estate after exemptions and reliefs, on which inheritance tax at 40% is calculated.

Nil-rate band and residence nil-rate band. £325,000 and up to £175,000 per person respectively, both frozen until April 2031, with the residence band tapering away between £2 million and £2.35 million of estate value.

Business Relief and Agricultural Relief allowance. From 6 April 2026, a combined £2.5 million per person receiving 100% relief, with 50% relief above that, transferable between spouses.

The following examples are for general information, not a projection for any specific estate.

On the second death, a couple relying on both spouses’ transferable allowances can still face inheritance tax on a combined estate of £2 million, because £2 million is exactly where the residence nil-rate band taper begins to bite.

Take a couple’s home worth £1.1 million and £900,000 in investments and cash, £2 million in total, with the home left to their children. At exactly £2 million the residence nil-rate band is not yet reduced, so up to £350,000 combined RNRB applies, alongside £650,000 combined nil-rate band, £1 million in total. That leaves £1 million taxable at 40%: £400,000 IHT bill.

A near-identical estate at £2.1 million loses £50,000 of RNRB, adding roughly £20,000 to the bill even though the estate grew by only £100,000.

A £5 million estate with a £2 million qualifying trading business can use the full £2.5 million Business Relief allowance on that business, leaving the rest of the estate taxed in the normal way.

With a £1.2 million home, a £2 million trading company, and £1.8 million in investments and cash, the residence nil-rate band is fully tapered away past £2.35 million, so it is £0. The £2 million in shares qualifies for 100% relief under the Inheritance Tax Act 1984, well inside the £2.5 million allowance. The remaining £3 million, less the £650,000 combined nil-rate band, gives a taxable estate of £2.35 million: £940,000 Inheritance tax at 40%. Without the business qualifying for relief, the same £5 million would be taxed on £4.35 million: £1,740,000, a difference of £800,000 attributable to Business Relief alone.

A £10 million estate with the same £2 million qualifying business gets no additional relief on that business simply because the rest of the estate is larger, since the £2.5 million allowance is fixed per person, not scaled to estate size.

Take a £2 million home, a £2 million trading business, and £6 million in investments, property, and cash. Residence nil-rate band is £0, as at £5 million. The £2 million business still receives 100% relief, using less than the full £2.5 million allowance. The remaining £8 million, less £650,000 combined nil-rate band, leaves £7.35 million taxable at 40%: £2,940,000. Business Relief still saves £800,000 compared with no relief at all, but that saving is proportionally smaller against a £10 million estate than against a £5 million one.

Bluebond Tax Planning clients work with their Bluebond tax planning team to build and agree a plan across all their assets, including estate planning structures that can help reduce inheritance tax where the right conditions apply.

For married couples, one potential structure directs part of the first spouse’s estate, typically business or agricultural assets qualifying for full relief, into a trust for the couple’s children or other descendants, rather than leaving everything outright, or in a spousal interest, to the surviving spouse.

Because that value never forms part of the surviving spouse’s own estate, and because full relief can mean no immediate inheritance tax charge applies to funding it this way, the value can move outside the household’s combined estate at the first death without triggering an inheritance tax charge at that stage. This can allow meaningful value to move out of the household’s combined estate without an upfront tax charge, though professional fees and the trust’s own ongoing tax position still need to be factored in.

This kind of first-death planning is designed to help make sure both spouses’ allowances are used as effectively as possible. Even where the surviving spouse’s own remaining assets exceed £2.35 million, as of the 2026 to 2027 tax year, structuring at first death like this can, in the right circumstances, help keep some or all of the residence nil-rate band intact on the second death. Whether this applies to a specific estate depends on individual circumstances and requires personalised review.[

Clients often assume the arithmetic scales in a straight line as their estate grows, and it does not. The £5 million and £10 million examples above use an identical £2 million business, and the relief saves exactly the same £800,000 in cash terms in both cases. What changes is how much of the remaining estate that relief no longer touches. Across Bluebond’s client base as a whole, 19 out of 20 clients who fully implement their recommended inheritance tax plan pay no inheritance tax; individual results depend on personal circumstances, estate structure and willingness to implement. For the largest estates specifically, the outcome depends on how much of the total sits in relievable assets, not on the total itself.

1. Have you calculated your estate’s value at today’s asset prices, not historic purchase prices?
2. Does your estate sit close to the £2 million or £2.35 million residence nil-rate band markers?
3. Do your qualifying business or agricultural assets sit under, at, or over the £2.5 million allowance?
4. Have you modelled the estate with and without full Business Relief, to see the relief’s real value?
5. Has the calculation been repeated for both spouses’ estates, not just a combined household figure?

• Assuming a bigger estate automatically gets more relief. The £2.5 million allowance is fixed per person.
• Comparing estates by total value alone, without checking how much sits in qualifying business or agricultural assets.
• Forgetting that the residence nil-rate band taper applies at exactly £2 million, not a rounded figure.
• Using last year’s property or business valuation for this year’s estimate.
• Treating any of these worked figures as a personal calculation rather than an illustration.

The jump from £2 million to £10 million is not a straight line. A £2 million estate can still owe tax purely from the residence nil-rate band taper. A £5 million estate with a qualifying business uses the new relief allowance efficiently. A £10 million estate needs the same allowance to work harder across a larger base. The structures that make the difference at each size, lifetime trusts, family investment companies, and business relief, are covered in Inheritance Tax Planning for Estates Over £2 Million: A UK Adviser’s Guide, and the trust-versus-company choice is set out in Family Investment Company vs Trust: Which Suits You?. Bluebond’s free webinar and IHT Mitigation Plan cover how to apply this to your own figures.

You should engage with advisers who work together to coordinate tax planning, legal work and, where you need it, FCA-regulated financial advice, rather than juggling separate advisers who don’t talk to each other. Bluebond Tax Planning coordinates tax planning in-house, with legal work carried out by qualified solicitors employed within the business (Bluebond Tax Planning is not itself an SRA-regulated law firm), and any FCA-regulated financial advice is arranged through our separate independent, FCA-authorised adviser partner firm, so nothing falls through the cracks between advisers. If you need any help or advice in this complex area please contact us. We can help you explore ways to mitigate your inheritance tax.

Disclaimer. The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. UK tax legislation changes frequently, and the specific application of any rule or strategy depends on individual circumstances. Figures, thresholds, and reliefs mentioned are correct as of the 2026 to 2027 tax year unless otherwise stated. Before acting on any information here, consult a qualified adviser who has reviewed your full situation. Bluebond Tax Planning provides tailored recommendations only under a signed client agreement, following a full review. Bluebond Tax Planning operates under UK legal frameworks, and the individual solicitors and other regulated professionals it employs are subject to their own professional conduct standards. Tax planning and legal work are not FCA regulated. Bluebond Tax Planning is not an SRA-authorised or SRA-regulated law firm; legal work is carried out by individual solicitors employed within the business, in their personal professional capacity.