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Inheritance Tax Planning

This can be a particularly difficult area of financial planning to navigate and consequently it is very important to seek advice on anything you are unsure of. 









For all estates, there is an exemption called the Nil Rate Band (NRB). Currently set at £325,000 (as at 2020/21 tax year), there is no inheritance tax liability on this portion of your estate. If your estate is valued at less than £325,000, no IHT will be payable at all.

Everyone gets their own Nil Rate Band. If you are married, and do not use that NRB when you die, your spouse/civil partner will be able to inherit that from you - meaning that, in effect married couples and civil partners have a combined NRB of £650,000.


Rising house prices have meant that for many people, the simple fact of owning a house has taken them into the realms of IHT. And when the house is the only asset that brings along such a liability, children have found themselves forced into selling the family home, at a difficult time, simply to meet the bill.

Since April 2017, therefore, it has also been possible to claim the Residential Nil Rate Band (RNRB), currently £175,000 per person.

Strategies for Mitigating Inheritance Tax: 

  • Maintain a defined contribution pension for as long as possible

  • Use the annual Gifting Allowance of £3,000

  • An annual Small Gifts allowance of £250 to gift to as many people as you wish

  • If you have a large income, you can make gifts out of regular income (or normal expenditure) provided it is habitual and it does not result in a change in your living standards i.e. it is consistently disposable

  • £2,500 for grandchildren’s weddings

  • You can leave some money to charity or an organisation providing a national benefit such as the National Trust and if over 10% of your estate is left to charity, your overall inheritance tax rate will be reduced from 40% to 36%

  • Business Property Relief options – products are available within which you can invest in BPR-qualifying shares and once they have been owned for at least two years, they can be passed on free from inheritance tax on the death of the shareholder (as long as the shares are still owned)

  • Discounted gift schemes. These give individuals the potential to immediately reduce the value of their estate for IHT purposes. It allows the donor to make a gift and retain the right, in the form of regular payments, to some of that gift

  • Making large gifts to beneficiaries (Potentially Exempt Transfers or PETs) requires the donor to live for 7 years (at least 3 before tapering of 40% IHT starts taking effect) but if you are fit and healthy and happy to relinquish control of certain assets this can be a simple way to go

  • Life assurance policies written under trust – this would be the most common form of inheritance tax mitigation but it requires underwriting and is often prohibitively expensive if people consider doing it later in life, hence why maintaining a defined contribution scheme can be quite an attractive prospect as it works in the same way (until age 75)

Visit our knowledge centre for more information.

If you believe you may have an inheritance tax liability and you wish to put some plans in place to mitigate this, please contact us.

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