Don’t Leave It to Chance: Why Inheritance Tax Planning Matters Now
If recent years have shown us anything, it’s that uncertainty is part of life and hoping everything will simply “work out” is not a strategy. This is especially true when it comes to what happens to your assets after you die. Inheritance Tax (IHT) planning is about control: ensuring your wealth passes to the people you choose, in the most tax-efficient way possible, while minimising stress and potential conflict for your family.
A clear, up-to-date plan can make a significant difference to how much of your estate is lost to tax and how smoothly matters are handled when the time comes.
What Is Inheritance Tax?
Inheritance Tax is charged on the value of your estate when you die. Your estate includes property, savings, investments, personal possessions and certain lifetime gifts, less any outstanding debts and liabilities. Whether IHT is payable depends on the total value of the estate and who inherits it.
The Key Thresholds (Current UK Rules)
Each individual has a nil-rate band (NRB) of £325,000. Estates below this value pay no IHT. This threshold has been frozen and is currently expected to remain at this level until at least April 2028.
In addition, you may be entitled to the residence nil-rate band (RNRB) of up to £175,000, provided you leave your main residence to direct descendants such as children or grandchildren.
Combined, these allowances mean:
- An individual can potentially pass on up to £500,000 tax-free
- A married couple or civil partners can pass on up to £1 million, as unused allowances can usually be transferred to the surviving partner
Where the net value of an estate exceeds £2 million, the RNRB is gradually withdrawn at a rate of £1 for every £2 over the threshold.
Any part of the estate above the available allowances is normally taxed at 40%, although this can reduce to 36% if at least 10% of the net estate is left to charity.
Ways to Reduce Inheritance Tax Legally
1. Spousal and civil partner exemptions
Assets passing between spouses or civil partners are generally free from IHT. Any unused allowances can usually be transferred, increasing the survivor’s thresholds.
2. Lifetime gifting
Gifts made more than seven years before death are normally outside the scope of IHT. If death occurs within seven years, taper relief may reduce the tax due. Annual exemptions, gifts from surplus income and marriage gifts can also play an important role.
3. Charitable giving
Leaving part of your estate to charity can reduce the overall tax rate and support causes that matter to you.
4. Reliefs for qualifying assets
Business Relief and Agricultural Relief may reduce or eliminate IHT on certain qualifying assets, provided strict conditions are met.
When Should You Start?
The answer is simple: as early as possible. Effective IHT planning takes time. Starting early allows you to make use of gifting allowances, review asset ownership, and adapt as your circumstances or tax rules change.
At Blue Rocket Accounting, we offer inheritance tax health checks to assess potential exposure, explore practical planning options and help ensure your will and wider financial arrangements remain aligned with your goals.
Don’t leave your family to deal with unnecessary tax and complexity. Speak to us about an inheritance tax review and take control of the legacy you leave behind.
