Inheritance Tax Planning
Tax-efficient investing in growing UK businesses. Income tax relief, tax-free dividends, and expert guidance from an FT Top 100 adviser.
About IHT Planning
Inheritance tax planning is about making sure more of your wealth goes to your family and less to HMRC. It involves looking at your full estate, understanding what the tax exposure is, and using the reliefs and allowances available to reduce it.
Inheritance tax applies at 40% on the value of your estate above £325,000. That threshold has been frozen since 2009 and won't increase until at least 2030.
Once you add up your home, pensions, savings, and investments, it's a figure many families now exceed without realising. HMRC collected £7.6 billion in IHT in the 2024/25 tax year, and the OBR forecasts that it will reach £9.7 billion by 2028/29.
There are several ways to reduce an IHT liability. Gifting, trusts, pension planning, business property relief, and making full use of your nil rate band and residence nil rate band all play a role. Most of these work better the earlier you start.
At Vintage Wealth Management, we start by modelling your estate under current rules so you can see exactly where you stand. From there, we work through the options that apply to your situation and help you act on them.
What is the inheritance tax threshold?
The inheritance tax threshold, known as the nil rate band, is £325,000 per person. Any value in your estate above that is taxed at 40%. The nil rate band has been fixed at this level since 2009 and is legislated to remain there until at least April 2030.
There is an additional allowance called the residence nil rate band (RNRB), worth up to £175,000. This applies when you leave your main home to direct descendants such as children or grandchildren. Combined with the standard nil rate band, you can pass on up to £500,000 before IHT applies.
If you're married or in a civil partnership, any unused nil rate band and residence nil rate band can transfer to the surviving spouse on death. A couple can potentially pass on up to £1 million to their children without triggering an inheritance tax charge.
Assets passed between spouses during lifetime or on death are also exempt from IHT entirely. If you're unmarried, none of these transfers apply, which makes planning even more important.
The residence nil rate band starts to taper if your total estate exceeds £2 million, reducing by £1 for every £2 above the threshold. For larger estates, it can disappear completely. If you're unsure where you sit, this is one of the first things we look at when reviewing your position.
How can you reduce your inheritance tax bill?
Which strategies apply to you depends on your estate, your family situation, and how much access you need to your assets. Most people use a combination.
Life insurance written in trust
A whole of life policy written in trust gives your family a lump sum to cover an IHT bill without having to sell property or other assets. Because the policy is held in trust, the payout doesn't form part of your estate. This doesn't reduce your IHT liability, but it makes sure your family can pay it without the pressure of a forced sale.
Trusts
Placing assets into a trust removes them from your estate and gives you control over how and when your beneficiaries receive the funds. The right structure depends on what you're trying to achieve, and if the value exceeds your available nil rate band, some trusts trigger an immediate IHT charge.
Pensions and
inheritance tax
Under current rules, pensions generally sit outside your estate for IHT purposes. From April 2027, unused pension funds will be brought into your estate. If you've been leaving your pension untouched as a way to pass wealth on, the strategy needs revisiting. The order in which you draw from pensions versus other assets can make a big difference, and we're already working through this with clients ahead of April 2027.
Gifting and the
seven-year rule
One of the easiest ways to reduce your estate is to give money away during your lifetime. You have a £3,000 annual exemption each tax year, and if you didn't use the previous year's allowance, you can carry it forward once, giving you up to £6,000 in a single year. Gifts within this allowance fall outside your estate immediately.
You can also make small gifts of up to £250 per person to any number of recipients, and wedding or civil partnership gifts of up to £5,000 to a child, £2,500 to a grandchild, or £1,000 to anyone else.
For larger gifts, the seven-year rule applies. If you make a gift above the annual exemption and survive for seven years, it falls outside your estate entirely. If you die within seven years, the gift is brought back into your estate for IHT purposes, though taper relief can reduce the tax due after the third year.
Regular gifts made from your surplus income can also be exempt from IHT from day one, provided they form part of a normal pattern and don't affect your standard of living. This is an area we spend a lot of time on with clients, because when it's set up properly it can be one of the most effective tools available.
Every April that passes without starting the seven-year clock is a year you don't get back. If this is something you've been thinking about, having a conversation early in the tax year gives you the most flexibility.
Business property relief
Business property relief (BPR) allows certain business assets to be passed on free of inheritance tax, or at a reduced rate. From April 2026, the 100% relief is capped at £2.5 million per individual. Above that, relief drops to 50%. AIM-listed shares move to a flat 50% relief regardless of value. If you hold business assets or AIM shares as part of an IHT strategy, reviewing your position in light of these changes is worth doing now.
Inheritance tax on property
For many families, the home is the largest asset in the estate. The residence nil rate band helps - up to £175,000 per person when you leave your home to direct descendants - but if your property value significantly exceeds that, you can still face a significant IHT bill. If your total estate exceeds £2 million, the RNRB starts to taper away. We model this as part of the estate review so you can see exactly where that starts to affect you.
How does inheritance tax work for married couples?
If you're married or in a civil partnership, you can pass assets to each other during your lifetime or on death without an IHT charge. Any unused nil rate band and residence nil rate band can also transfer to the surviving spouse. This means a couple can pass on up to £1 million to their children or grandchildren before IHT applies.
If you're not married or in a civil partnership, none of this applies. There's no exemption for transfers between partners, no transferable allowances, and no automatic inheritance rights. IHT planning matters for everyone, but for unmarried couples the starting position is much harder.
Why work with Vintage Wealth Management?
Vintage Wealth Management has been advising clients on inheritance tax planning for over a decade. We're voted FT Adviser UK Top 100 Financial Advisers every year since 2021, and our team includes Chartered Financial Planners and Fellows of the Personal Finance Society who specialise in estate planning, trusts, and tax-efficient wealth transfer.
We have offices in Central London, North West London, Portsmouth, Buckinghamshire, Swindon, and Dublin, and we work with clients across the UK.
IHT planning doesn't sit in a silo. Your pensions, investments, property, and protection all feed into it. We look at the full picture and build a plan you can act on. Get in touch and we'll take it from there.
Frequently asked questions about IHT
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Inheritance tax is charged at 40% on the value of your estate above the nil rate band, which is currently £325,000. If you're married or in a civil partnership and your spouse dies first without using their full allowance, the unused portion transfers to you - potentially doubling the threshold to £650,000. The residence nil rate band can add a further £175,000 per person.
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There is no single best way to reduce inheritance tax. It depends on your estate, your family, and how much access you need to your assets. The most common strategies include making use of your annual gifting allowances, setting up trusts, reviewing how your pensions sit within your estate, and claiming reliefs like business property relief. Starting early makes a significant difference, particularly with the seven-year gifting rule
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Yes, there's no limit on how much you can give away. The question is whether the gift will be free from inheritance tax. Gifts above the £3,000 annual exemption are treated as potentially exempt transfers. If you survive for seven years after making the gift, it falls outside your estate entirely. If you die within that period, taper relief may reduce the tax after the third year. Regular gifts from surplus income can also be exempt from day one if structured correctly.
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A financial adviser with experience in estate planning is usually the best starting point. They can model your IHT exposure, recommend strategies to reduce it, and coordinate with your solicitor on wills and trusts. An accountant can help with the tax calculations, and a solicitor handles the legal side of wills and trust documentation. At Vintage Wealth, we work alongside both to make sure everything fits together.
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Under current rules, pensions generally sit outside your estate for IHT purposes. From April 2027, that changes. Unused pension funds will form part of your estate, which means they'll be included when calculating your IHT liability. If you've been relying on your pension as a way to pass wealth to the next generation, now is a good time to review your options.
Disclaimer
The information supplied is based upon our understanding of current UK law and HM Revenue and Customs (HMRC) practice. Tax law and HMRC practice may change from time to time. The value of any tax relief will depend on the individual circumstances of the investor.
Business Property Relief (BPR) is subject to HMRC rules and may change in the future. Qualification depends on individual circumstances and is not guaranteed. Investments that aim to qualify for BPR, such as shares in smaller or unlisted companies, carry higher risk and their value can fall as well as rise. Investors may not get back the full amount invested. BPR typically requires assets to be held for at least two years and relief will only apply if the qualifying conditions are met at the time of death.
Your capital is at risk – your investment can fall as well as rise in value so you could get back less than you invest. In addition, because AIM-listed companies tend to be smaller, more volatile and subject to less stringent checks than those quoted on the main London Stock Exchange, the risks are greater. The Financial Conduct Authority do not regulate tax planning or trusts.
The information contained within this communication does not constitute financial advice and is provided for general information purposes only. Links to related sites have been provided for information only. Their presence on this blog does not mean that the firm endorses any of the information, products or views published on these sites. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.