Inheritance Tax Planning
For many families and business owners, inheritance tax can significantly reduce the value of what is passed to the next generation. Inheritance tax planning aims to manage that impact while ensuring you retain sufficient control and access to meet your own needs.
Why This Matters Now
- IHT receipts in the UK reached record levels in recent years as frozen thresholds, rising asset values, and property price growth have brought more estates into the tax net.
- The October 2024 Budget introduced significant changes: from April 2027, unused pension funds will be included in estates for IHT purposes, and changes to agricultural and business property relief will take effect from the same date.
- Early planning gives you access to the broadest range of solutions. The longer you wait, the fewer options remain available.
What is Inheritance Tax Planning?
Inheritance tax (IHT) planning is the process of arranging your estate, including property, investments and business interests, to mitigate potential IHT liabilities, within current legislation and without compromising your own financial security. It often combines allowances and reliefs with gifting strategies, trusts, and appropriate insurance.
Key Facts
- IHT is charged at 40% on the value of your estate above the available nil-rate band thresholds.
- The nil-rate band is currently £325,000 per person. An additional residence nil-rate band of up to £175,000 may apply when leaving a qualifying property to direct descendants.
- Couples can pass up to £1 million to their children free of IHT if the estate is structured correctly.
- Gifts made more than seven years before death are generally free of IHT, subject to conditions.
- Business Property Relief and Agricultural Property Relief may reduce IHT on qualifying assets, but conditions apply, and reliefs are subject to proposed changes from April 2027.
Who is This For?
- Individuals and couples whose total estates may exceed available IHT thresholds.
- Business owners with shares or interests that may qualify for reliefs but need careful planning in light of proposed rule changes.
- Families concerned about the impact of IHT on the next generation or on specific assets, such as the family home or business.
- Individuals approaching retirement who want to integrate pension planning with estate planning in response to the proposed 2027 changes.
What This Service Aims to Achieve
- Estimate your potential IHT exposure based on current legislation and asset values.
- Make full use of available allowances and exemptions.
- Explore lifetime gifting, trust planning and other structures that can reduce the taxable value of your estate.
- Ensure that any planning remains flexible enough to accommodate future needs and changes in circumstances or legislation.
Our Inheritance Tax Planning Process
Understanding Your Estate and Objectives
We review your assets, liabilities, existing wills and any previous gifts, and clarify your priorities for family, charity and business succession.
Using Allowances and Exemptions
We ensure appropriate use of nil-rate bands, residence nil-rate bands where available, and other exemptions and reliefs allowed by legislation, including annual gifting exemptions.
Considering Gifting and Trusts
We explore lifetime gifting and the potential use of trusts to pass assets to the next generation while managing control and access. The use of trusts can also help protect beneficiaries and ring-fence assets for specific purposes.
Reviewing Regularly
IHT rules and asset values can change significantly. We review your arrangements periodically to confirm that your planning remains appropriate and aligned with current legislation, including any future changes introduced in subsequent budgets.
Frequently Asked Questions
Will my home be subject to inheritance tax?
This depends on the value of your total estate, how the property is owned, and whether you are leaving it to direct descendants. The residence nil-rate band may reduce the liability in qualifying circumstances.
Is gifting always the answer?
How will the proposed pension IHT changes affect my planning?
Do business assets always qualify for relief?
Important Information
This page is for educational purposes and should not be construed as personalised financial advice. Ark Wealth Management is an Appointed Representative of Quilter Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority. The value of investments can fall as well as rise, and you may not get back the full amount invested. The levels and bases of taxation, and reliefs from taxation, can change at any time and depend on individual circumstances. Please consult Ark and other qualified advisers before making any decisions based on this information.