We don’t want to consider paying high amounts of tax on whatever we choose to leave to our loved ones once we pass away. But if you’re not aware of how to plan properly, you’re likely to get taxed.

The tax in question is known as Inheritance Tax (IHT), and it will likely affect anyone who leaves money, property or possessions behind after death.

Thankfully, there are ways to mitigate it and arrange your affairs tax-efficiently.

In this blog, we’ll look at inheritance tax, how it works, and how you can plan for the future to minimise the amount your inheritors may pay.


When do I have to pay IHT?

Your estate will be subject to IHT if, when you die, it exceeds the individual nil-rate band, which currently stands at £325,000.


How IHT works

Upon a person’s death, IHT is charged on their estate, including their property, money, and possessions.

There won’t be any IHT to pay if:

  • the estate’s value is below the £325,000 threshold
  • anything above the threshold is left to a spouse, civil partner, charity or community sports club.

If the estate is valued below the threshold, you must still report it to HMRC. There are other situations that you’ll need to report, which can be found on the government website.



Couples – those recognised through marriage or civil partnership – have a combined tax threshold of £625,000. 

If one partner dies before the other and their estate is valued at less than £325,000, the remaining balance will be transferred to their partner.


Standard rate

Anything over the threshold will be subject to IHT at a rate of 40%. Your estate can pay a reduced rate of 36% on some assets so long as 10% or more of the net value is left to a charity in your will.


Methods of reducing IHT

Your IHT liability can be reduced in other ways than leaving assets to charity.

There are three tried and tested methods of reducing IHT:

  • Write a will
  • Gift to family members or close friends
  • Set up an IHT-efficient trust.


Write a will

If you haven’t already, writing a will is necessary for proper estate planning. Without one, your assets will be distributed according to intestacy rules – this means anyone receiving the assets will be expected to pay IHT.

Make sure to name people in your will – such as your partner or child – to lessen the tax on your assets, money or property.



Another way to reduce IHT is to gift your possessions or assets. Provided they aren’t sold in the seven years preceding your death, they will remain tax-free.

Each year, you can give monetary gifts of up to £3,000 without incurring any tax. If it’s a wedding gift or for your child, it increases to £5,000.


Setting up a trust

By setting up a trust, you’ll create a secure place for your wealth to be accessed by your beneficiaries without paying IHT. You can store assets, possessions or cash within a trust.

A trust is outside your estate and, therefore, outside of IHT.

You can set controls so that it only becomes accessible once the beneficiary has reached a certain age. This would be done via your will.

If you don’t plan on leaving anything behind, spending your money and selling your assets during your retirement is another option, allowing you to bring your estate below the threshold when you die.


Talk to a professional

With such a sensitive topic, it’s often good to hear from someone with years of experience. That’s where we come in.

We’ll talk to you about your estate and where IHT could be minimised so that you leave a lasting legacy for your loved ones.

Get in touch with us today to discuss inheritance tax.

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