Your financial life is likely to be busy and complex. Careers are demanding, family responsibilities are front and centre, and wealth may be spread across several assets. That makes clarity especially valuable.
This isn’t about diving into technical detail, it’s about asking the right questions early and understanding where thoughtful planning can make a real difference.
Why does Inheritance Tax matter more now?
IHT has long been seen as a concern only for the very wealthy. Yet frozen thresholds, rising property values and evolving rules mean more estates are affected, often unintentionally.
It’s worth asking:
- Could my home, pensions or investments push my estate over the threshold?
- Would my family understand what happens if something unexpected occurred?
- Am I relying on outdated assumptions about how IHT works?
Awareness now creates options later.
A quick refresher: how does IHT work?
IHT is charged on the value of someone’s estate when they die. An estate includes:
- Property
- Savings and investments
- Personal possessions
- Other assets held in their name.
Currently, estates valued above £325,000 may be subject to IHT on the amount above that threshold, usually at 40%. This rate can reduce to 36% if at least 10% of the estate is left to charity.
What role does property play?
There is an additional allowance, the main residence nil-rate band, which applies when a home is passed to direct descendants, such as children, stepchildren or grandchildren. This allowance currently stands at £175,000 per person.
When combined with the standard threshold, this means:
- Individuals can potentially pass on £500,000 tax-free
- Married couples or civil partners may pass on up to £1m.
However, this additional allowance is tapered for estates worth over £2m and removed entirely above £2.35m, which can catch families by surprise.
Who pays the tax and when?
IHT is usually paid by the executor of the estate before assets are distributed. In some situations, particularly involving lifetime gifts, beneficiaries may become liable if conditions aren’t met.
This can place pressure on families at an already difficult time, especially if assets are illiquid.
What planning options are available?
This is where planning really matters. Options may include:
- Making lifetime gifts using annual exemptions
- Planning larger gifts that may fall outside the estate after seven years
- Making regular gifts from surplus income, where appropriate
- Using spousal exemptions and transferable allowances
- Considering trusts to move assets out of an estate while retaining some control
- Using life insurance written in trust to help beneficiaries meet any IHT bill
- Leaving gifts to charity to reduce the overall IHT rate
- Exploring reliefs for certain business or agricultural assets.
Each option has rules and implications, and not all are suitable for every family.
What’s changing and why does it matter?
From 6 April 2027, most unused pension funds and death benefits will be included within the value of an individual’s estate for IHT purposes.
This means pensions, which have previously been a powerful IHT planning tool, will increasingly need to be considered alongside other assets. Personal representatives will be responsible for reporting and paying any IHT due on these funds.
This change makes early awareness and joined-up planning even more important.
What should I be thinking about now?
At this stage, IHT planning is as much about preparation and communication as it is about tax.
Ask yourself:
- Do I know what I might inherit and how it’s structured?
- Have my parents taken advice on IHT and estate planning?
- Are beneficiary nominations and Wills up to date across the family?
Your Finli planner can help facilitate these conversations, ensuring plans remain aligned as wealth grows and family circumstances evolve. With complexity and change at the heart of IHT, tailored advice can provide clarity, confidence and reassurance for you and your family.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.