At this stage, Inheritance Tax (IHT) planning becomes less abstract and more practical. Decisions made now can have a lasting impact on how smoothly wealth transfers later and how much of it ultimately reaches your family.
This isn’t about rushing into action. It’s about clarity, preparation and asking the right questions while you still have time and flexibility on your side.
Why does IHT deserve attention now?
As careers peak and assets mature, estates often reach their highest values. Property, pensions and investments can combine to push estates well beyond IHT thresholds, sometimes without families realising it.
It’s worth pausing to ask:
- If I added everything up today, what might my estate be worth?
- Would my family face an unexpected tax bill if something happened tomorrow?
- Are my plans still based on current rules, or outdated assumptions?
With frozen thresholds and evolving legislation, reviewing your position sooner rather than later can create options and avoid unnecessary pressure later on.
A reminder of how IHT works
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.
Is gifting part of your legacy plan?
Approaching retirement is often an ideal time to think about lifetime gifting. You may have greater clarity over your future income needs and feel more confident sharing wealth while you’re able to see the benefit it brings.
Options to explore include:
- Making use of annual gifting allowances
- Planning larger gifts that may fall outside your estate after seven years
- Making regular gifts from surplus income, where appropriate
- Supporting children or grandchildren with education, housing or financial security.
Questions to consider:
- Could gifting now reduce future complexity and tax later?
- Would I prefer to help family during my lifetime rather than through my Will?
- How can I give without compromising my own financial security?
Pensions and IHT: a shifting landscape
From April 2027, most unused pension funds and death benefits will be included within the value of an estate for IHT purposes. This represents a significant shift in how pensions fit into legacy planning.
This change raises important questions:
- Are my pension beneficiary nominations up to date?
- Should I be reviewing how and when pension benefits are accessed?
- Does my pension strategy still align with my wider estate planning?
Pensions can no longer be considered in isolation. They need to be part of a joined-up plan.
Who needs to be involved in the conversation?
This stage of life is also about communication. Clear conversations with family can prevent misunderstandings and ensure your wishes are understood.
Ask yourself:
- Do my family know what I want to happen?
- Would my executors know where to find key documents?
- Have I shared enough information to make things straightforward?
Your Finli planner can help guide these discussions, bringing structure, sensitivity and clarity, while ensuring plans remain flexible as circumstances change.
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.