Don’t Leave It to Chance: Why Inheritance Tax Planning Matters Now
If the past few years have taught us anything, it’s that uncertainty is real, and hoping things simply “work out” isn’t a plan. Nowhere is this more crucial than in preparing for what happens after your death. Having a thoughtful, up-to-date inheritance tax (IHT) plan helps ensure your assets pass to your heirs in the most tax-efficient way, avoids unnecessary family tensions, and gives you both control and peace of mind.
What Is Inheritance Tax?
Inheritance Tax is a levy on your “estate” after you die, including your home, other property, cash, investments, and personal belongings, minus any debts. Whether your beneficiaries need to pay depends on how much your estate is worth and how it’s distributed.
The Key Thresholds (2025/26)
- Every individual has a nil-rate band (NRB) of £325,000. Estates under this amount pay no IHT.
- You may also qualify for the residence nil-rate band (RNRB) of up to £175,000 if you pass your main residence to direct descendants (children, grandchildren, etc.).
- Together, these allowances mean a single person could pass on up to £500,000 free of IHT (if conditions are met), or a married couple up to £1,000,000, through transferable allowances.
- Note: If your estate’s net value exceeds £2 million, the RNRB begins to taper (reduce) by £1 for every £2 over the threshold.
- Any value above your available allowances is typically taxed at 40% (or 36% if you leave at least 10% of your net estate to charity).
How to Reduce Your IHT Liability Legally
1. Use the spousal exemption and transfer unused allowances
Assets passing between spouses or civil partners are generally exempt from IHT, and any unused NRB/RNRB can be transferred to the survivor, enlarging the allowances.
2. Gift assets during your lifetime (Potentially Exempt Transfers - PETs)
Gifts made more than seven years before death can escape IHT entirely. If death occurs within seven years, taper relief may reduce charges.
You also get certain exemptions: £3,000 of gifts per year, gifts in consideration of marriage, regular gifts from income, etc.
3. Consider charitable giving
Leaving 10% or more of your net estate to charity can reduce the IHT rate on the remainder to 36%.
4. Use business or agricultural reliefs
If part of your estate is a family business or qualifying agricultural property, you may qualify for 100% or 50% relief, depending on conditions. (Be aware: proposed changes from 2026 may limit or change how these reliefs interact with other allowances.)
When Should You Start?
Now. Inheritance tax planning is most effective when done early. Start with compiling a full balance sheet, assets vs liabilities, so you know how your estate measures up against thresholds. If your net worth already exceeds the NRB, you’ll especially want to explore gifting strategies, insurance solutions or reliefs.
At Blue Rocket Accounting, we can carry out an IHT health check for you: estimate likely liabilities, propose tailored strategies, and guide you in updating wills and executing any actions required. With annual check-ups (or whenever your circumstances change), you’ll stay ahead of shifts in tax law and asset values.
Don’t leave your family to untangle this after you’re gone. Speak to us today about a comprehensive inheritance tax review, and secure the legacy you intend, not the one HMRC writes.
