Inheritance Tax or IHT, is a tax charged on the value of your estate on death. Your estate includes assets like your home, additional properties, savings and investments (including any ISAs), company shares, cars and personal possessions.
Inheritance Tax is charged at 40% on the value of your assets that exceed the Nil Rate Band (NRB), which is currently frozen at £325,000.
For married couples and civil partners, you will have a combined Residence Nil Rate band (RNRB) of £650,000. In certain circumstances, this can be increased to £1,000,000 where a home passes to immediate descendants.
As property and asset values continue to rise, many will now feel the impact of the extended freeze on Inheritance Tax NRB and the RNRB in place until 2030 highlighting the need for proper estate planning.
UK Inheritance Tax is charged on worldwide assets for those who are domiciled or deemed domiciled until 6 April 2025 when the concept of domicile is replaced by the concept of long-term tax residency. Those who are not UK domiciled or deemed domiciled up to 5 April 2025 and those who will not be considered to be a long-term UK tax resident from 6 April 2025 are only subject to UK Inheritance Tax on UK situs assets and specific consideration is required for cross-border tax issues. If you require support in this area we have a specialist international tax team.
To protect your estate and any assets you wish to pass on to your loved ones, it is important to have a plan, one that allows you to manage, reduce or mitigate a potentially large Inheritance Tax bill.
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Our award-winning team of personal tax specialists are on hand to review your personal position and assets to determine your Inheritance Tax exposure and create a plan to mitigate this where appropriate. If you would like to speak with one of our specialists about Inheritance Tax planning or wider estate planning, please do not hesitate to get in touch.
Hina (Desai) has gone above and beyond to help steer me through complicated Inheritance Tax Planning including trusts, she is excellent at both the financial and human side of such situations. Hina is now helping with planning for the next generation. I wouldn’t hesitate to recommend her.
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Andy (Springford) has been able to guide and advise us on all our financial affairs with complete openness. When we wished to go down a different path he was always gracious about this. Often we ended up doing what he had originally suggested! We have been able to enjoy our retirement by feeling confident about his advice in long-term planning, especially Inheritance Tax planning.
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Gifting can be a great way of passing on wealth to your loved ones, reducing the value of your estate for Inheritance Tax purposes. How to gift is vital when thinking about long-term wealth protection.
From April 2027, pension funds will be subject to Inheritance Tax. While there is still some time before these changes take effect, consideration should be given to planning options, and action will potentially need to be taken before April 2027.
In most cases, there is a full IHT exemption for transfers between spouses and civil partners. This applies to both lifetime gifts and assets transferred on the death of one spouse. Care should be taken if one spouse is domiciled outside the UK (or from 6 April 2025, someone who is not long-term UK tax resident) as the spousal exemption can be restricted.
Under the current tax legislation in England and Wales, the same IHT tax treatment is expected to apply to married or civil-partnered couples. The rules may differ however in instances where couples are cohabiting.
Inheritance Tax, or IHT, is a tax charged on the value of your estate on death. This includes your home, additional properties, savings and investments (including any ISAs), company shares, cars and personal possessions.
Currently, Inheritance Tax is charged at 40% on the net value of relevant assets which are passed on to your beneficiaries after death.
You may be able to leave up to £325,000 in cash or assets tax-free and receive an additional £175,000 allowance on your home if you are leaving it to a direct lineal descendant (and your total estate is less than £2,000,000).
The Inheritance Tax Nil Rate Band has been fixed at £325,000 since 2009 and has been frozen to 2030.
The Nil Rate Band (NRB) is the limit at which you should not have to pay Inheritance Tax on your estate. The NRB is currently £325,000.
£650,000 for a married couple. In certain circumstances, this can be increased to £1,000,000 per couple where their home passes to a direct lineal descendent (the Inheritance Tax RNRB).
Each person's estate can benefit from the NRB. RNRB may be available in addition to the NRB.
The executor of your estate will be responsible for paying your Inheritance Tax to HMRC.
The deadline for paying Inheritance Tax is the end of the sixth month after a person’s death. If it is not paid within that period, HMRC will start to charge interest.
An IHT bill can be paid by post or online.
An IHT bill can be paid by post or online.
You can reduce your Inheritance Tax liability by making gifts, setting up trusts, or leaving a portion of your estate to charity.
From April 2027, pension funds will be subject to Inheritance Tax. This means that IHT could be charged on your pension when you die.
Inheritance Tax reliefs can help reduce the tax payable on an estate. These include:
Annual gift exemption: Each tax year you can gift up to £3,000 tax-free. You can also carry forward any unused exemptions from the previous year and for couples, you could have a combined gifting exemption of £12,000.
Small gifts exemption: Each tax year you can give gifts of up to £250 to any number of individuals, provided the total to any one individual doesn't exceed £250.
Gifts between spouses and civil partners: Gifts between spouses and civil partners are generally exempt from Inheritance Tax, provided the recipient is UK-domiciled (or long-term UK tax resident from 6 April 2025).
Business Relief (BR): Some business assets, can be passed on free of Inheritance Tax or with a reduced bill. Qualifying assets include shares in unlisted companies and business property owned for at least two years.
Agricultural Property Relief (APR): Applied to agricultural property, such as farmland, that has been owned for at least two years. Inheritance Tax can reduce your bill by up to 100%.
Changes were made to both Business Relief and Agricultural Property Relief in the 2024 Autumn Budget from 6 April 2026. From that date, the first £1m of qualifying assets will be exempt from Inheritance Tax and the excess will attract 50% relief. The £1m will be shared across assets qualifying for BR and APR on pro-rata basis.
Taper Relief: If you give a gift and survive for at least three years but less than seven, the Inheritance Tax on the gift is reduced on a sliding scale
Charitable Donations: You can leave 10% or more of your estate to charity and the Inheritance Tax on the rest of your estate can be reduced from 40% to 36%.
The UK tax regime has several complex rules which impact you as a high-net-worth individual. With complexity comes confusion and misinterpretation which in turn, could mean you pay more tax than you need to, particularly in the case of Inheritance Tax (IHT). Below we debunk some of the myths surrounding IHT and planning opportunities to help protect your wealth for future generations.
My approximate net recorded income is £90,000 per tax year and my recorded expenditure is approximately £70,000 per tax year. Am I able to gift the entire £20,000 difference annually, without incurring inheritance tax on any of the £20,000?
Pension funds have, for some time, been used as a tax-efficient way to pass wealth to future generations as they, in almost all instances, sit outside of an individual's estate. Pensions are therefore not part of Inheritance Tax (IHT) calculations and are not subject to the punitive 40% IHT rate.
Inheritance Tax (IHT) planning isn’t something that can be looked at once and ticked off the list. As the value of your assets change, so must your plans.
Gifting can be a great way of passing on wealth to your loved ones as well as reducing the value of your estate for Inheritance Tax (IHT) purposes and general estate planning.
While personal and family circumstances will differ for each couple, tax rules are the same for both LGBTQ+ and non-LGBTQ+ couples.
Inheritance Tax (IHT) was once regarded as a tax that only affected the very wealthy. However, rising property prices and a freeze on allowances mean many more people are facing a tax charge upon death. Everyone’s circumstances are different and it is important that (even those who might not consider themselves particularly wealthy) get proper tax and financial planning advice.
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