Net worth calculator — methodology

Net worth, which is the easy part

assets      = cash + ISAs + investments + pensions + home + other
liabilities = mortgage + other debts
net worth   = assets − liabilities

The result is reported even when it is negative. A negative net worth is an ordinary position for anyone early in a mortgage, and flooring it at nil would hide the thing the reader is looking at.

The tax that has not been paid yet

Three of the rows above carry tax on the way out and three do not, and the difference is the whole reason this page exists:

ISAs                   →  no tax, ever. Worth the balance.
cash                   →  no tax on the capital. Interest is taxable income.
main home              →  normally none. Private residence relief.
pension                →  part tax free; the rest is taxable income
investments (unwrapped)→  capital gains tax on the GAIN, not the value
other assets           →  not modelled here

The pension figure is a difference of two engine positions, not a rate multiplied by an amount:

tax free   = tax-free rate × pot
taxable    = pot − tax free
income tax = tax(other income + taxable) − tax(other income)

Differencing rather than banding is what captures the personal allowance being reallocated across income types and tapering away above its threshold. A single marginal rate applied to the whole withdrawal would be right only for a withdrawal small enough not to move anything, and a pension pot is not that.

It is a one-tax-year figure and the page says so wherever it appears. Drawing an entire pension in one year is the most expensive way to take it; over more years each brings a fresh personal allowance and a fresh basic-rate band and the total falls. It is shown because it is the honest upper bound on tax already owed, not because it is a plan.

The capital gains figure stacks the gain on top of taxable income to decide which rate it meets, after one annual exempt amount. One — the exemption is annual rather than per disposal, so this calculation assumes no other gains in the year and the whole account sold within it.

The same total, on death

estate            = max(0, net worth)
chargeable estate = estate − spouse exemption
                    less residence nil-rate band, where a home is closely inherited
                    less nil-rate band
inheritance tax   = death rate × what is left

The estate is floored at nil, which is both what the engine requires and the right answer: an insolvent estate has no inheritance tax to pay. The residence nil-rate band applies only where a home passes to direct descendants, and it is set against the whole chargeable estate rather than against the home — it is not a relief on the property.

Above the taper threshold the residence band is withdrawn as the estate grows. That withdrawal is measured against the estate before exemptions and reliefs, which is why an estate passing entirely to a spouse can pay no tax at all and still lose its residence band — and the tapered figure is what transfers to the survivor.

The rate on the next pound of estate, which is not in any table

Inside the taper, an extra pound of estate is charged at the death rate and costs residence nil-rate band, so it exposes more than itself. For 2026/27 the measured rate on that pound is 60.00%.

It is measured rather than written down, by a forward difference of £1 on the estate value, which is the engine’s own method for its marginalRate field. Writing the figure into copy would be a hardcoded number produced by two rules that can each move independently — the death rate and the taper ratio — and it would go stale silently if either did.

Rates, thresholds and allowances

The inheritance tax figures are identical across both years, and that is policy rather than a copy-paste: the nil-rate band, the residence nil-rate band and the taper threshold are frozen by announced policy for several years ahead. A frozen figure is exactly the kind that stops being right without anyone editing it, so the end of the freeze is recorded in the verification log rather than in this sentence.

Sources

• gov.uk — Tax when you get a pensionThe tax-free share of a defined contribution pot and the treatment of the rest as income.
• gov.uk — Capital gains tax rates and annual tax-free allowancesThe annual exempt amount and the rates by asset class.
• gov.uk — Tax when you sell your homePrivate residence relief, which is why the main home carries no capital gains tax on this page and a second property would.
• gov.uk — Inheritance TaxThe nil-rate band, the rate on the estate above it and the spouse exemption.
• gov.uk — Inheritance Tax: residence nil rate bandThe residential enhancement, the closely-inherited condition and the taper above the threshold.
• gov.uk — Income Tax rates and allowances: current and pastThe personal allowance and its taper, which decide what a pension withdrawal costs.

Five things that change the answer and are not modelled

• A second property or a business, in “other assets”. Both are added at face value with no tax attached. A second property carries capital gains tax at the residential rates, so the after-tax figure is too high for anyone with one; a qualifying business or farm may attract business or agricultural property relief against inheritance tax, so the estate figure is too high for anyone with one of those. They are wrong in opposite directions, which is why neither is approximated.
• Defined benefit pensions. A final salary or career average pension is an income promise rather than a pot, and has no balance that belongs in a total of what you own. A cash equivalent transfer value is a price for giving the promise up, not a valuation of it.
• Lifetime gifts, trusts and transferred bands. The inheritance tax panel here models an estate and nothing else. Gifts in the seven years before death, a predeceased spouse’s unused percentages and the reduced rate for a charitable estate all change the answer, and each of them is an input this page does not ask for.
• Everything on the engine’s own exclusion list. Business and agricultural property relief, trusts and settled property, the residence-based regime from 6 April 2025, quick succession relief, grossing up, small and wedding gifts, gifts with reservation and the downsizing addition. That list is attached to every result the engine returns and is printed in full on the calculator page, each with the direction of its error stated.
• Time. There is no growth rate, no term and no indexation anywhere on this page. Every figure is today’s balance at the selected year’s rates, so nothing here is a forecast and none of it is presented as one.