Inheritance tax and estate planning

Careful inheritance tax and estate planning can help you pass on your assets securely and efficiently to the people and causes you care about.

What is inheritance tax?

Inheritance tax (IHT) is a tax on the transfer of wealth. Most commonly, IHT is paid by the estate of someone who has died, but it can also be payable within someone’s lifetime. If your estate is valued at above the inheritance tax ‘nil-rate band’ when you die – currently £325,000 – the excess will be liable for IHT. The standard inheritance tax rate is 40%, which on a sizeable estate could translate into a significant sum of money.

Mitigating inheritance tax

Rising property prices and the freezing of the IHT nil-rate band could see more families having to pay inheritance tax than has been the case in the past.

There are lots of ways to mitigate inheritance tax, but understanding what’s right for you and your family isn’t always straightforward. The complexities involved mean many families leave legacy planning until the last minute, when it is too late to make a meaningful difference.

By speaking to us early on, we can help you manage your estate’s IHT liability and build an estate plan that works for you. We can help you:

My advisers have always been very helpful over the 30 years I have been with you.
Source: Client satisfaction survey 2023

Make plans that leave a legacy

Imagine a lifetime plan that means those you care about are financially secure. Let’s work together and make this idea a reality.

Estate planning and gifting

Estate planning is about so much more than looking for ways to reduce inheritance tax. Gifting money to your children and grandchildren could make a huge difference to their quality of life and financial security. And if you pass on money while you’re still alive, as opposed to via your will, you’ll get to see your loved ones benefit from your wealth.

We can help you create a lifetime gifting plan that suits your family’s unique circumstances.


We can help you:

Cashflow modelling

It’s really important that you don’t gift more money than you can afford. By using cashflow modelling, we’ll demonstrate how much you can afford to give away without harming your own financial security.

Passing on your pension

Pensions can play an important role in mitigating IHT. Unlike ISAs, pensions usually fall outside of your estate and so can be passed on to your beneficiaries free from inheritance tax. We can help you explore whether it makes sense to use other investments, such as ISAs, to provide retirement income, thereby retaining funds in your pension for as long as possible.

Taking control with trusts

Trusts can help to reduce an inheritance tax bill and give you control over how your assets are used by future generations. Trusts can help you:

  • Keep a lump sum outside of your survivor’s estate so it is not subject to IHT
  • Protect your children/grandchildren’s legacy if your surviving spouse remarries
  • Protect your children/grandchildren’s legacy from their own marital disputes
  • Avoid giving children/grandchildren a sum of money that they may not spend as wisely as you would like

Trusts can be complicated. We can make a referral to a legal professional to assist you.

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A guide to inheritance tax planning

Learn more about estate planning, and how writing a will, lifetime gifting and managing your IHT liability can help you and your loved ones in our comprehensive guide.

Download guide

Common questions on inheritance tax and estate planning

The inheritance tax threshold, or ‘nil-rate band’, is currently £325,000. It means that no IHT will be due on the first £325,000 of your estate when you die, regardless of who you leave it to. Married couples and civil partners can transfer any unused element of their IHT nil-rate band to their living partner when they die. This means a couple has a joint nil-rate band of £650,000.

The residence nil-rate band is an additional inheritance tax allowance. To qualify, you must pass on your main residence, or the sale proceeds of your former residence, to your children or grandchildren when you die. Currently, the maximum residence nil-rate band is £175,000. However, it is tapered by £1 for every £2 that your estate exceeds £2m. This means that it won’t be available if your estate’s assets exceed £2.35m.

If you make a gift that isn’t immediately tax free – for example, one that exceeds your £3,000 annual gifting exemption – it is known as a potentially exempt transfer. You must live for at least another seven years for it to be tax free.

Potentially exempt transfers made within the seven years before you die reduce your IHT nil-rate band. The nil-rate band is currently £325,000. So, if you gave your child £200,000 and died within seven years, you would only be able to pass on £125,000 of your estate tax free after your death.

If you gave away more than £325,000 in the seven years before you died, you would eliminate your IHT nil-rate band, and anyone who received a gift above this threshold would have to pay IHT. These gifts are taxed on a sliding scale; this is known as taper relief:

Years between gift and deathRate of tax
0 to 3 years40%
3 to 4 years32%
4 to 5 years24%
5 to 6 years16%
6 to 7 years8%
7 or more years0%
Source: HMRC

In most cases, pensions sit outside of your estate and so can be passed on to your beneficiaries free from inheritance tax.

Gifts to qualifying charities are exempt from IHT, regardless of the size of the gift. Leaving a gift to a charity in your will could reduce the rate of IHT charged on your estate from 40% to 36%. However, it only applies if you leave at least 10% of your ‘net estate’ to charity.

This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Information is provided only as an example and is not a recommendation to pursue a particular strategy.

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