Inheritance Tax Planning
for your estate

Inheritance tax planning is the work of legitimately reducing the tax a future estate will pay, using the allowances, exemptions, and reliefs that Parliament put in place for exactly that purpose. With the nil-rate band frozen at GBP 325,000 since 2009 and property and investment values rising over the same period, estates that were comfortably below the threshold a decade ago are now squarely within charge. The result is that ordinary families, not just the wealthy, increasingly need a considered plan rather than hoping the position resolves itself.

Good planning starts with an honest valuation of the whole estate: the home, savings, investments, life policies not written in trust, business and agricultural assets, and from 6 April 2027 unused pension funds, which come within the scope of inheritance tax for the first time. Only once the real exposure is modelled can the available bands, the spouse exemption, lifetime gifting, reliefs, and charitable giving be combined into a plan that fits the family rather than a generic template.

We specialise in inheritance tax, so the plan is built by people who handle these calculations regularly and keep current with the rules. We model the numbers and coordinate with the solicitor who drafts the documents, so the work is done by a specialist rather than a generalist who sees one estate a year.

Inheritance tax is charged at 40% on the value of an estate above the available nil-rate bands, with a reduced rate of 36% where at least 10% of the net estate passes to charity. The starting point for everyone is the nil-rate band of GBP 325,000, which has been frozen since 2009 and is currently set to remain frozen for years to come. Because the threshold has not moved while house prices and investment values have, the practical effect is a steadily widening net: estates that would have escaped charge entirely a decade ago now face a bill, and the planning question is rarely whether tax is in point but how much of it is avoidable.

On top of the nil-rate band sits the residence nil-rate band of GBP 175,000, available where a residence (or its value) passes to direct descendants such as children, stepchildren, adopted children, or grandchildren. The residence band is not universal. It tapers away by GBP 1 for every GBP 2 by which the estate exceeds GBP 2,000,000, so an estate of GBP 2,350,000 or more loses it entirely. This taper produces a sharp effective rate on the slice of estate just above GBP 2,000,000, which is one of the most common things a specialist models because the answer often points to gifting or charitable giving to bring the estate back below the cliff edge.

Transfers between UK-domiciled spouses and civil partners are exempt, and the survivor can inherit the unused proportion of the first death's nil-rate band and residence nil-rate band. Used together, this is what lets a married couple or civil partnership pass on up to GBP 1,000,000 free of inheritance tax: two nil-rate bands of GBP 325,000 and two residence bands of GBP 175,000. Claiming the transferable bands is not automatic. The personal representatives have to make the claim on the second death and produce evidence of what was unused on the first, which is exactly the kind of documentation a specialist keeps in order years in advance so it is not a scramble later.

Lifetime gifting is the next lever. The annual exemption of GBP 3,000 can be given away each year with no inheritance tax consequence, and one year of unused allowance can be carried forward, so up to GBP 6,000 in a first year. Small gifts of up to GBP 250 per recipient per tax year are exempt, and gifts out of surplus income are exempt entirely where they are regular, made from income rather than capital, and leave the giver's standard of living unaffected, all properly evidenced. Larger outright gifts are potentially exempt transfers, which fall out of the estate completely once the giver survives seven years. Where death occurs between three and seven years after a failed gift, taper relief reduces the tax payable on that gift, though it never reduces the value of the gift itself.

Charitable giving is both a personal wish and a planning tool. A gift to a UK charity is exempt from inheritance tax, and if the gifts to charity reach at least 10% of the net estate, the rate on the rest of the estate falls from 40% to 36%. Modelling this properly matters because the 10% test is applied to a defined baseline figure rather than the headline estate, and a small increase in the charitable legacy can sometimes leave the family better off after tax as well as supporting a good cause. A specialist runs the comparison so the decision is made on the real numbers.

The horizon now includes pensions. From 6 April 2027, unused pension funds come within the scope of inheritance tax, which removes one of the long-standing routes for passing wealth on outside the charge. For anyone whose plan assumed pensions would sit outside their estate, this is a material change that needs to be modelled and, in many cases, responded to with a revised drawdown and gifting approach. It is one of several reasons that an inheritance tax plan is not a one-off document but something a specialist keeps under review.

Estates clustered just above GBP 2,000,000 are the situation where general advice most often goes wrong. The residence nil-rate band taper means the slice of estate between GBP 2,000,000 and roughly GBP 2,350,000 can carry a punishing effective rate once the lost band is taken into account. Bringing the estate back below GBP 2,000,000, through lifetime gifting or a larger charitable legacy, can recover the full residence band and save far more than the gift costs. The arithmetic is specific to each estate and is exactly the kind of modelling a specialist does before any document is drafted.

Second marriages and blended families need careful structuring rather than a standard mirror will. The spouse exemption and the transferable bands work cleanly for a couple leaving everything to each other and then to shared children, but where there are children from previous relationships the survivor's freedom to redirect assets can disinherit the first deceased's children entirely. The tax planning and the family-protection planning have to be solved together, which is where the accountant and the solicitor coordinate closely, and where a trust is sometimes part of the answer.

Domicile and cross-border estates change the rules materially. Non-UK-domiciled individuals have historically been within the inheritance tax net only on UK-situated assets, and the rules in this area have been undergoing significant reform toward a residence-based test. Foreign property, foreign-situs assets, and double-tax treaties all affect the position, and the planning that works for a wholly UK estate can be wrong for an internationally mobile family. This is specialist territory and should never be approached with a domestic template.

Joint ownership of property and the form it takes affects both tax and what actually passes under the will. A home held as joint tenants passes automatically to the survivor outside the will, which can be the right answer for a married couple but the wrong one for unmarried partners or for families trying to use both nil-rate bands on the first death. Severing a joint tenancy into a tenancy in common is sometimes a deliberate planning step, and getting the ownership form right is a precondition for several of the structures a specialist might otherwise recommend.