Create a legacy for future generations | Insights from the experts
Life happens. Change is inevitable. Things happen that we cannot control and we only try to prepare as well as we can. Planning your estate early might seem overwhelming, but unfortunately, no one knows when their time will come. To give you and your family peace of mind, estate planning should be given careful consideration.
At a glance
- IHT nil-rate band
- £325,000 (frozen)
- Residence nil-rate band
- Up to £175,000
- IHT rate above allowances
- 40%
- Gifts fall outside estate after
- 7 years
Inheritance tax
Inheritance tax is charged at 40% on the value of an estate above the available allowances. Every individual has a nil-rate band of £325,000, which has been frozen for some years. Where a home passes to direct descendants, an additional residence nil-rate band of up to £175,000 may also apply. Between a couple, unused allowances can be combined, which is how many estates can pass on up to around £1m before inheritance tax bites — though the residence allowance is tapered for larger estates. Once you add pension funds and life insurance policies on top, inheritance tax can quickly become a major concern. Without proper financial planning, the harsh reality is HM Revenue & Customs could become the largest beneficiary of your estate following your death. It can help to understand why inheritance tax exists and how the 7 year rule on gifts works.
Reducing your estate
If you recognise you do have more than enough to live your life to the full, you need to think about reducing your estate to avoid unnecessary taxes. Gifts (if they are above the annual allowance) could be a good way to start as they will be completely out of the estate after just 7 years.
Tax allowances
Utilising your tax allowances is also part of estate planning. Pensions, Business Property Relief (BPR) and trusts could all be part of the estate management strategy. Pensions have traditionally sat outside the estate for inheritance tax purposes, which has made them useful in estate planning — but this is changing: from April 2027, most unused pension funds are due to be brought within the estate for inheritance tax, so it is important to keep plans under review. If you have been a business owner for at least two years, BPR could also be an option, offering relief on qualifying business assets, though the rules were tightened from April 2026 and the relief is no longer unlimited. Trusts are used to pass assets to your beneficiaries in a controlled way, potentially reducing an Inheritance Tax bill. A trust can hold assets or insurance policies and can be set up exactly to your wishes — our trusts page and guide to putting life insurance in trust explain more.
Your future
While it is important to think about what you can leave behind, it is also important to remember that you have worked hard for your money and you should make sure to enjoy it. Don’t leave the thing you always wanted to do until “one day”. With lifestyle financial planning you could identify, achieve and maintain the lifestyle you want.
We offer estate and inheritance planning services that maximise the net value of the estate by reducing taxes where possible. To take the next steps, explore our estate planning and inheritance tax planning services, and if you are weighing up passing on property, read can I give my house to my children?.
