Scottish Inheritance Tax Calculator

How inheritance tax works in Scotland

Inheritance Tax (IHT) is reserved to Westminster — the Scottish Parliament has no power to change it. So a Scottish estate is taxed on exactly the same basis as one in England: a £325,000 nil-rate band, a further £175,000 residence nil-rate band where the home passes to direct descendants, and 40% on anything above the available bands. What is different in Scotland is how the estate is administered and divided, not how much tax is due.

The two nil-rate bands

The nil-rate band (NRB) of £325,000 is available to everyone. The residence nil-rate band (RNRB) of £175,000 is extra, but it comes with conditions: you must own a home, and it must pass to direct descendants — children, grandchildren, step-children or adopted children. The RNRB is capped at the value of the home, so a £100,000 home only gives £100,000 of RNRB.

Both bands are transferable between spouses and civil partners. When the first partner leaves everything to the survivor (which is exempt), their unused bands transfer, so the survivor's estate can use up to £650,000 NRB + £350,000 RNRB = £1 million tax-free.

The £2 million taper

The residence band is withdrawn for larger estates. For every £2 of estate above £2 million, you lose £1 of RNRB. A single person's £175,000 band is gone once the estate reaches £2.35 million; a couple's combined £350,000 is gone at £2.7 million. The standard £325,000 nil-rate band is never tapered.

A worked example

Take a £600,000 Scottish estate that includes a home worth £300,000 left to the deceased's children:

• Nil-rate band: −£325,000
• Residence nil-rate band (home to children): −£175,000
• Total tax-free: £500,000
• Taxable estate: £600,000 − £500,000 = £100,000
• IHT at 40%: £40,000

Without the residence band — say the home is sold and left as cash to a niece — only the £325,000 NRB applies, and the bill rises to £110,000. The structure of who inherits what materially changes the tax.

The Scotland-specific complications

Two features of Scots law sit on top of the UK tax rules:

• Legal rights (legitim). A spouse and children have an automatic, indefeasible claim on the moveable estate (cash, investments, possessions — not land or buildings) that a will cannot remove. This can pull assets in a direction that wasn't tax-planned. See how Scottish succession works.
• Confirmation, not probate. Before assets can be released, the executor must obtain confirmation from the Sheriff Court — and HMRC generally requires the IHT (or the first instalment) to be paid first, which creates a cash-flow trap.