Tax is charged at 40% on the value of your estate above your nil rate band. If you leave your home to children or grandchildren, a residence nil rate band can increase the tax-free amount.
Planning matters
Gifts, trusts, pensions and spouse transfers can all change the result, so use this as a starting point.
Worked example
See it with real numbers
An estate of £900,000 including a £400,000 home left to children has £500,000 of allowances (£325,000 plus £175,000). The taxable estate is £400,000 and the inheritance tax is £160,000.