Quick answer
UK inheritance tax has effectively just one main rate for 2026/27: 40% on the value of an estate above the available nil-rate band(s). The rate drops to 36% if at least 10% of the ‘baseline amount’ of the estate is left to a registered charity. Lifetime gifts above £325,000 (gov.uk — Inheritance Tax) into discretionary trusts trigger a 20% entry charge (the headline 40% rate split between lifetime payment and on-death balance). Trusts pay up to 6% periodic charge every 10 years on assets above the available NRB. Taper relief reduces the rate on gifts made 3–7 years before death on a sliding scale (from 32% at 3 years to 8% at 6–7 years). This guide explains all the UK IHT rates in 2026/27 — the headline 40%, the charity 36%, the trust rates, the lifetime rates — with worked examples and the practical situations each applies to.
Last reviewed: 24 May 2026 by the MP Estate Planning editorial team. Jurisdiction: England and Wales. Scotland and Northern Ireland have different probate and intestacy rules; the IHT thresholds are UK-wide.
As a homeowner in the UK, understanding Inheritance Tax is crucial for effective estate planning. Inheritance Tax is a tax on the estate of someone who’s passed away, with a standard rate of 40% applied to the portion of the estate exceeding the £325,000 threshold.
We recognise that navigating the complexities of Inheritance Tax can be daunting. Our goal is to provide you with clear guidance, empowering you to make informed decisions about your estate. Effective inheritance tax planning is vital to protect your family’s future and ensure that your assets are distributed according to your wishes.
Key Takeaways
- Understanding the current UK Inheritance Tax rates is essential for effective estate planning.
- The standard Inheritance Tax rate is 40% on the portion of the estate above £325,000.
- Inheritance Tax planning is crucial to protect your family’s future and assets.
- Seeking professional guidance can help navigate the complexities of Inheritance Tax.
- Clear planning ensures that your assets are distributed according to your wishes.
What is Inheritance Tax?
Three rule changes you may need to consider (2026/27)
1. Pensions become subject to IHT from 6 April 2027. Most unused defined-contribution pension pots currently sit outside the estate for IHT — that ends on 6 April 2027 (gov.uk policy paper). HMRC estimates around 10,500 estates will face IHT for the first time as a result.
2. Business and agricultural property reliefs capped at £2.5m per person from 6 April 2026. Above the cap, only 50% relief applies — effective IHT of 20%. AIM shares dropped to 50% relief and do not use the £2.5m allowance (Saffery — APR/BPR reforms).
3. The NRB, RNRB and £2m taper threshold are frozen until 5 April 2031 following the 2024 and 2025 Budgets (gov.uk — NRB and RNRB freeze). With inflation, more estates will be pulled into IHT each year — a process commonly called “fiscal drag.”
The UK’s Inheritance Tax system is complex, but knowing how it works can help you plan better. Inheritance Tax is charged on the estate when someone dies, with most estates below £325,000 being outside the scope of IHT. The tax rate is 40% on amounts above this threshold.
Definition of Inheritance Tax
Inheritance Tax is levied on the total value of the deceased’s estate, including property, savings, and other assets. Understanding the inheritance tax thresholds is crucial for effective planning.
Purpose of Inheritance Tax
The primary purpose of Inheritance Tax is to generate revenue for the government while also acting as a tool to redistribute wealth. It ensures that the wealth accumulated by an individual during their lifetime contributes to the public purse upon their passing.
Who is Affected by Inheritance Tax?
Inheritance Tax affects individuals with estates valued above the outside the scope of IHT threshold. This includes people with significant assets, such as property, investments, and savings. Understanding how inheritance tax works is essential for those looking to reduce its impact on their estate.
Current Inheritance Tax Rates in the UK
The UK’s inheritance tax system can be complex, but knowing the current rates is a good starting point. Inheritance tax is levied on the estate of a deceased person, and understanding the applicable rates is crucial for effective estate planning.
Standard Rate
The standard rate of Inheritance Tax in the UK is 40%. This rate applies to the portion of the estate that exceeds the outside the scope of IHT allowance. For instance, if an estate is valued at £500,000 and the outside the scope of IHT allowance is £325,000, the taxable amount would be £175,000 (gov.uk — RNRB). The Inheritance Tax due at 40% would be £70,000.
Reduced Rate
A reduced Inheritance Tax rate of 36% applies if at least 10% of the estate is left to charity. This encourages philanthropy while reducing the tax burden on the estate. Using the previous example, if £50,000 (10% of £500,000) is donated to charity, the taxable amount remains £175,000, but the tax rate drops to 36%, resulting in a tax liability of £63,000.
outside the scope of IHT Allowance
The outside the scope of IHT allowance, also known as the nil rate band, currently stands at £325,000. Estates valued below this threshold are exempt from Inheritance Tax. For married couples and civil partners, the allowance can effectively be higher due to the ability to transfer unused allowances between spouses.
To summarize:
- Standard Inheritance Tax rate: 40%
- Reduced rate (if 10% or more donated to charity): 36%
- outside the scope of IHT allowance: £325,000
Understanding these rates and allowances is key to navigating the complexities of Inheritance Tax in the UK. Effective estate planning can help reduce your inheritance tax liability, ensuring more of your estate is passed on to your loved ones.
Understanding the Nil Rate Band
Inheritance tax can be a complex topic, but grasping the nil rate band is a key step in managing your estate’s tax obligations.
Definition of Nil Rate Band
The nil rate band refers to the amount up to which no inheritance tax is payable. Essentially, it’s a outside the scope of IHT allowance that can significantly reduce the tax burden on your estate.
Current Nil Rate Band Amount
As of the current tax year, the nil rate band is £325,000. However, this amount can be increased to £500,000 if you leave your home to direct descendants, thereby potentially reducing your inheritance tax liability.
For the most up-to-date information, you can refer to the UK Government’s official guidance on inheritance tax nil rate.
How it Affects Inheritance Tax
The nil rate band directly affects the amount of inheritance tax payable on your estate. By utilizing this outside the scope of IHT allowance effectively, you can reduce the tax burden on your beneficiaries.
| Estate Value | Nil Rate Band | Inheritance Tax Liability |
|---|---|---|
| £400,000 | £325,000 | £30,000 (7.5% of £75,000) |
| £600,000 | £500,000 (with residence relief) | £40,000 (20% of £100,000) |
By understanding and leveraging the nil rate band, you can develop a more effective inheritance tax planning strategy, potentially saving your estate thousands of pounds in tax.
outside the scope of IHT Allowances Explained
Understanding outside the scope of IHT allowances is crucial for effective inheritance tax planning. These allowances can significantly reduce the tax burden on your estate, ensuring that more of your wealth is passed on to your loved ones.
The Residence Nil Rate Band
The Residence Nil Rate Band is an additional allowance of up to £175,000 that applies if you leave your home to direct descendants. This can substantially reduce the inheritance tax liability, especially for those with significant residential assets.
For example, if you’re leaving a property worth £300,000 to your children, the Residence Nil Rate Band can reduce the taxable amount, potentially saving a significant amount in inheritance tax.
Gifts and Their Exemptions
Gifts are a common way to reduce the value of your estate and reduce your inheritance tax liability. Gifts of up to £3,000 per year are exempt from inheritance tax. Additionally, gifts made on a regular basis or as part of normal expenditure are also exempt.
- Gifts to individuals: Gifts to individuals are generally exempt if they are below the annual allowance.
- Gifts to charities: Donations to registered charities are exempt from inheritance tax.
- Gifts for weddings: Gifts made in consideration of marriage or civil partnership are exempt up to certain limits.
Annual Gift Allowance
The annual gift allowance allows you to give away up to £3,000 per year without incurring inheritance tax. Unused allowances from the previous year can be carried forward, allowing for greater flexibility in gift-giving.
Utilizing these outside the scope of IHT allowances effectively requires careful planning and a thorough understanding of the available exemptions. By making informed decisions, you can reduce the inheritance tax burden on your estate.
Key Dates and Deadlines
Effective inheritance tax management hinges on being aware of critical dates and deadlines. Understanding these timelines is crucial for executors and beneficiaries to navigate the complexities of inheritance tax.
Reporting and Payment Deadlines
Inheritance Tax must be reported and paid within 12 months from the date of death. This deadline is critical, and missing it can result in penalties and interest on the tax owed.
- Key Deadline: Report and pay Inheritance Tax within 12 months from the date of death.
- Additional Requirement: Submit the Inheritance Tax account (IHT400) and other relevant forms to HMRC within the specified timeframe.
Changes in Tax Rates Over Time
Tax rates and allowances have evolved, with the current nil rate band frozen until April 2028. Being aware of these changes is vital for effective inheritance tax planning.
- Current Nil Rate Band: Frozen until April 2028, impacting long-term tax planning.
- Historical Changes: Understanding past changes in tax rates and allowances can help in planning for the future.
Staying informed about key dates and deadlines, as well as changes in tax legislation, is essential for reducing inheritance tax liabilities. We recommend regular reviews of estate plans to ensure compliance and optimize tax efficiency.
Deductions and Reliefs Available
The UK tax system offers several deductions and reliefs that can help reduce Inheritance Tax, ensuring more of your estate goes to your loved ones. Understanding and utilizing these can make a significant difference in your estate planning.
Charitable Donations
Charitable donations can significantly reduce your Inheritance Tax liability. If you leave at least 10% of your estate to charity, you can benefit from a reduced Inheritance Tax rate of 36%. This not only supports a good cause but also reduces the tax burden on your estate.
For instance, if your estate is worth £500,000 and you leave £50,000 (10%) to charity, the Inheritance Tax rate on the remaining £450,000 could be reduced. This can result in significant tax savings, making more funds available for your beneficiaries.
“Charitable giving is not just about supporting a cause you believe in; it’s also a strategic way to reduce your Inheritance Tax liability.”
Business Relief
Business Relief is another valuable deduction available against Inheritance Tax. It applies to certain business assets, such as shares in unlisted companies or business premises. To qualify, the business must be trading rather than investing.
The relief can be 100% or 50%, depending on the type of business asset. For example, shares in an unlisted trading company may qualify for 100% Business Relief, significantly reducing your Inheritance Tax liability.
| Business Asset Type | Business Relief Percentage |
|---|---|
| Shares in unlisted trading company | 100% |
| Business premises | 50% |
Agricultural Relief
Agricultural Relief is available on certain agricultural property, such as farmland and farmhouses. This relief can be 100% or 50%, depending on the circumstances. For instance, if you own farmland that is let out, it may qualify for 100% Agricultural Relief.
To qualify for Agricultural Relief, the property must have been occupied for agricultural purposes. This relief can significantly reduce the Inheritance Tax payable on agricultural assets, helping to preserve family farms and agricultural businesses.
For more information on Inheritance Tax and how to plan your estate effectively, visit our page on whether you pay taxes on inheritance in the.
How to Calculate Inheritance Tax
Understanding how to calculate inheritance tax is crucial for effective estate planning. We guide you through the process to ensure you’re well-prepared.
Step-by-Step Calculation Process
Calculating inheritance tax involves determining the estate’s value, deducting allowable expenses, and applying the relevant tax rates. Here’s a step-by-step guide:
- Determine the total value of the estate, including all assets.
- Deduct allowable expenses and debts.
- Apply the nil rate band and any other applicable reliefs.
- Calculate the tax due on the remaining chargeable amount.
| Estate Component | Value (£) | Reliefs/Allowances | Chargeable Amount (£) |
|---|---|---|---|
| Property | 500,000 | Nil Rate Band: 325,000 | 175,000 |
| Cash & Investments | 200,000 | Annual Exemptions: 3,000 | 197,000 |
| Total | 700,000 | 372,000 |
For the “inheritance tax calculation,” understanding the nil rate band and other reliefs is key. The nil rate band currently stands at £325,000. Any unused nil rate band can be transferred to a surviving spouse or civil partner.
Common Mistakes to Avoid
When calculating inheritance tax, it’s easy to make mistakes that can lead to overpayment or underpayment. Common pitfalls include:
- Incorrect valuations of estate assets.
- Failing to claim available reliefs and exemptions.
- Overlooking the transferable nil rate band.
To avoid these “common mistakes,” ensure you’re working with a qualified professional who understands the intricacies of inheritance tax.
By following these steps and being aware of potential pitfalls, you can accurately determine your inheritance tax liability and plan accordingly.
Exemptions and Special Cases
The UK tax system provides several exemptions that can help reduce Inheritance Tax liability. Understanding these exemptions is crucial for effective estate planning.
Spousal Exemption
Transfers between spouses are exempt from Inheritance Tax. This means that if you leave your estate to your spouse, it will not be subject to Inheritance Tax. This exemption also applies to transfers made during your lifetime.
Civil Partner Exemption
Similar to spousal exemption, transfers between civil partners are also exempt from Inheritance Tax. This ensures that your civil partner can inherit your estate without incurring Inheritance Tax liability.
Other Exemptions
Other exemptions include gifts to charities and certain types of trusts. For instance, gifts to registered charities are exempt from Inheritance Tax, which can be a beneficial way to reduce your tax liability while supporting causes you care about.
Additionally, certain types of trusts can be used to reduce Inheritance Tax. For example, a trust set up for the benefit of your grandchildren could be exempt from Inheritance Tax, depending on the specific circumstances.
It’s essential to consult with a financial advisor to understand how these exemptions apply to your specific situation and to ensure you’re taking advantage of all available exemptions.
Planning Ahead for Inheritance Tax
Proactive planning can significantly reduce the impact of inheritance tax on your estate, ensuring more of your wealth goes to your loved ones. As we navigate the complexities of inheritance tax, it’s essential to understand the strategies that can help reduce this tax burden.
Importance of Estate Planning
Estate planning is a crucial step in managing your inheritance tax liability. By organizing your assets and making informed decisions, you can significantly reduce the tax payable upon your passing. Effective estate planning not only helps in reducing inheritance tax but also ensures that your wishes are respected and your loved ones are taken care of.
We recommend considering the overall value of your estate, including properties, savings, and other assets, to determine the potential inheritance tax liability. This assessment will form the basis of your estate planning strategy.
Strategies for Minimising Inheritance Tax
Several strategies can be employed to reduce inheritance tax. These include:
- Making gifts to family members or charities, which can reduce the value of your estate.
- Setting up trusts to manage and distribute your assets according to your wishes.
- Utilizing available reliefs, such as Business Relief or Agricultural Relief, if applicable to your estate.
Each of these strategies has its benefits and potential drawbacks. For instance, making gifts can be an effective way to reduce your estate’s value, but there are rules regarding gift tax and potential liabilities if you pass away within a certain period after making the gift.
Role of a Financial Advisor
A financial advisor can play a pivotal role in helping you navigate the complexities of inheritance tax planning. They can provide personalized advice based on your financial situation and goals, helping you to make informed decisions.
By working with a financial advisor, you can ensure that your estate plan is comprehensive, taking into account all relevant tax reliefs and exemptions. They can also assist in implementing strategies to reduce inheritance tax, such as setting up trusts or making strategic gifts.
Frequently Asked Questions About Inheritance Tax
We’re often asked about inheritance tax, and we’re here to provide clarity. Many individuals have questions regarding how inheritance tax is calculated, what exemptions are available, and how to plan ahead effectively.
Common Inquiries Addressed
Some of the most common questions we receive include:
- How is inheritance tax calculated?
- What are the current inheritance tax rates in the UK?
- Are there any exemptions or reliefs available?
- How can I plan ahead to reduce inheritance tax?
For instance, understanding the nil rate band and how it applies to your estate is crucial. The nil rate band is the amount of your estate that is exempt from inheritance tax. For the current tax year, this amount is £325,000. You can find more detailed information on the inheritance tax limit in the UK.
Clarifying Misconceptions
There are several misconceptions about inheritance tax that we would like to clarify:
- Inheritance tax is only for the wealthy. While it’s true that larger estates are more likely to be subject to inheritance tax, many people with more modest estates may also be affected.
- Giving away assets before death can reduce your inheritance tax liability. While gifts can be an effective strategy, there are rules and potential pitfalls to consider.
- Inheritance tax is always paid by the beneficiaries. In reality, inheritance tax is typically paid by the estate before the remaining assets are distributed to the beneficiaries.
Resources for Further Information
For those seeking more information, we recommend visiting the UK Government’s website for official guidance on inheritance tax. Additionally, consulting with a financial advisor who specializes in estate planning can provide personalized advice tailored to your circumstances.
By understanding the FAQs and clarifying common misconceptions about inheritance tax, you can better navigate this complex area and make informed decisions about your estate.
Conclusion: Navigating Inheritance Tax in the UK
Navigating the complexities of inheritance tax in the UK requires a thorough understanding of the tax rates, allowances, and available reliefs. Effective inheritance tax planning can significantly reduce tax liability, ensuring that more of your estate is passed on to your loved ones.
Key Takeaways
Understanding the current UK inheritance tax rates, including the standard and reduced rates, is crucial. The nil rate band and residence nil rate band are key allowances that can significantly impact your tax liability. Various reliefs, such as business and agricultural relief, can also reduce the amount of tax payable.
Effective Tax Planning Strategies
To reduce inheritance tax, it’s essential to engage in proactive tax planning. This can include making gifts, utilizing trusts, and taking advantage of available exemptions. By understanding the intricacies of UK inheritance tax rates and implementing effective inheritance tax planning strategies, you can protect your estate and ensure a smoother transfer of wealth.
FAQ
What are the current UK Inheritance Tax rates?
The current UK Inheritance Tax rates are 40% for amounts above the outside the scope of IHT allowance and 20% for certain gifts made during one’s lifetime, known as a ‘lifetime charge’. However, there’s a reduced rate of 36% if 10% or more of the net estate is left to charity.
What is the Inheritance Tax threshold in the UK?
The Inheritance Tax threshold, also known as the Nil Rate Band, is currently £325,000. This means that estates valued below this threshold are generally exempt from Inheritance Tax.
How does the Nil Rate Band affect Inheritance Tax?
The Nil Rate Band allows individuals to pass on up to £325,000 without incurring Inheritance Tax. When combined with the Residence Nil Rate Band, which is currently £175,000, a total outside the scope of IHT allowance of £500,000 can be achieved for married couples or civil partners, potentially reducing Inheritance Tax liability.
What is the Residence Nil Rate Band and how does it work?
The Residence Nil Rate Band is an additional outside the scope of IHT allowance that applies when a main residence is passed to direct descendants, such as children or grandchildren. The current allowance is £175,000, and it can be used in conjunction with the Nil Rate Band to reduce Inheritance Tax.
Are there any exemptions from Inheritance Tax?
Yes, there are several exemptions, including transfers between spouses or civil partners, gifts to charities, and certain gifts made during one’s lifetime, such as small gifts or gifts in consideration of a marriage or civil partnership.
How can I reduce Inheritance Tax liability through estate planning?
Effective estate planning can help reduce Inheritance Tax liability. Strategies include making gifts during one’s lifetime, utilizing trusts, and maximizing available allowances and reliefs, such as Business Relief and Agricultural Relief.
What is the role of a financial advisor in Inheritance Tax planning?
A financial advisor can provide expert guidance on Inheritance Tax planning, helping individuals and families navigate complex rules and regulations, and develop strategies tailored to their specific circumstances.
What are the deadlines for reporting and paying Inheritance Tax?
Inheritance Tax must be reported to HMRC within 12 months of the date of death, and any tax due must be paid within six months of the date of death to avoid penalties and interest.
Can I make gifts to reduce Inheritance Tax liability?
Yes, making gifts during one’s lifetime can help reduce Inheritance Tax liability. However, certain rules and regulations apply, such as the seven-year rule, and it’s essential to consider the potential impact on one’s own financial security.
How does Business Relief work in the context of Inheritance Tax?
Business Relief can reduce the value of business assets included in an estate for Inheritance Tax purposes, potentially reducing Inheritance Tax liability. The relief can be 50% or 100%, depending on the type of business assets and the level of business activity.
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The 7-Year Rule, Taper Relief, and Transferable Nil Rate Band
Two of the most frequently misunderstood areas of inheritance tax planning involve lifetime gifts and what happens to any unused nil rate band when a surviving spouse or civil partner eventually dies. Getting these mechanics right can make a material difference to the tax position of an estate.
How the 7-Year Rule Applies to Lifetime Gifts
When you make a gift to another individual, that gift is typically classified as a Potentially Exempt Transfer (PET). If you survive for seven full years after making the gift, it generally falls outside the scope of IHT entirely. If you die within those seven years, the gift may be brought back into your taxable estate and assessed for inheritance tax, depending on the total value of gifts made.
Where the cumulative value of gifts exceeds the nil rate band of £325,000, tax may be due on the excess. However, taper relief can reduce the rate of tax applied — though it is worth noting that taper relief reduces the tax charge, not the value of the gift itself. The relief operates as follows:
- 0–3 years before death: 40% tax rate applies (no taper relief)
- 3–4 years before death: effective rate reduced to 32%
- 4–5 years before death: effective rate reduced to 24%
- 5–6 years before death: effective rate reduced to 16%
- 6–7 years before death: effective rate reduced to 8%
- More than 7 years before death: generally outside the scope of IHT
Full guidance on taper relief and PETs is published by HMRC in their Inheritance Tax manual: HMRC IHTM14531 — Taper relief: introduction. In our experience, many families underestimate the importance of keeping contemporaneous records of gift dates and values, which can become critical evidence if HMRC later queries the estate.
When Taper Relief May Not Deliver the Saving You Expect
Taper relief is only relevant where the total value of chargeable transfers exceeds the nil rate band. If a person has made gifts of, say, £200,000 in the three years before death but their estate is otherwise modest, taper relief may not reduce the charge at all because the gifts fall within the remaining nil rate band. In our experience, this distinction is routinely overlooked, and a structured gifting plan — potentially involving a discretionary trust rather than outright gifts — may in some circumstances provide greater flexibility and protection than simple lifetime transfers. Whether that is appropriate will depend on individual circumstances, and we would always recommend taking advice from a regulated professional before proceeding.
Transferable Nil Rate Band: What Happens When the Second Parent Dies
Where a spouse or civil partner dies and their nil rate band has not been fully used — for example, because they left their entire estate to the surviving spouse, which is typically an exempt transfer — that unused proportion can generally be transferred to the survivor’s estate. This means a surviving spouse may be entitled to up to double the nil rate band, currently a potential allowance of £650,000 before standard rate IHT applies, or up to £1,000,000 when both residence nil rate bands are also available.
The claim for a transferred nil rate band must be made by the personal representatives of the second estate to die, typically using HMRC form IHT402. The claim is not automatic; it requires evidence of the first spouse’s estate and tax position. Where records are incomplete or a will was not in place, establishing the correct transferred amount can become complex. Our team frequently assists families in gathering the necessary documentation to support these claims.
Common Questions About UK Inheritance Tax
How much can you inherit in the UK without paying tax?
The amount you can inherit without an IHT liability depends on the composition of the deceased’s estate and the reliefs available. At a minimum, estates valued below £325,000 — the nil rate band, which has been frozen at this level since 2009 — are generally outside the scope of IHT. Where the deceased owned a qualifying residential property and left it to a direct descendant, the residence nil rate band of £175,000 may also apply, bringing the potential threshold for a single person to £500,000. For married couples and civil partners making use of the transferable nil rate band, the combined threshold may reach up to £1,000,000. It is the estate, not the beneficiary, that is typically assessed for IHT — so in most cases the recipient does not pay tax directly on what they inherit.
Who pays inheritance tax on death?
Inheritance tax is generally paid by the personal representatives of the deceased — that is, the executors named in the will, or administrators appointed where there is no will. The tax is paid from the assets of the estate before those assets are distributed to beneficiaries. In most cases, IHT must be paid before probate is granted, which can create a practical cash-flow challenge, particularly where the main asset is a property. HMRC’s guidance on paying inheritance tax sets out the available payment methods, including an instalment option for certain assets such as land and unlisted shares.
How much tax will I pay on my inheritance?
In most cases, as a beneficiary you will not pay tax on assets you receive from an estate — the liability sits with the estate itself. However, any income subsequently generated by inherited assets, or gains on their disposal, will typically be subject to income tax or capital gains tax in the usual way. If you are trying to estimate the IHT position of a specific estate, an inheritance tax calculator can provide a useful starting point: enter the total estate value, deduct the applicable nil rate band and residence nil rate band, and apply the 40% standard rate (or 36% reduced rate where at least 10% of the net estate is left to a qualifying charity) to the chargeable remainder. Our team is able to work through more detailed scenarios with you, including the effect of gifts, trusts, and business or agricultural reliefs.
Can I gift £100,000 to my son in the UK?
There is generally no legal restriction on making a gift of £100,000 to your son during your lifetime. However, for IHT purposes, a gift of this size would typically be treated as a Potentially Exempt Transfer and would need to survive the seven-year period to fall fully outside the scope of IHT. The gift would also be assessed cumulatively with any other chargeable transfers made in the preceding seven years. Only the first £3,000 of gifts in any tax year is covered by the annual gift exemption; amounts above this threshold rely on the PET rules. Keeping a clear written record of the date, amount, and recipient of any substantial gift is important for the purposes of any future IHT calculation.
How do I avoid 40% inheritance tax in the UK?
There is no single approach that is suitable for every estate, and any planning should reflect your personal and financial circumstances. That said, commonly used strategies that may reduce an IHT liability include: making use of annual gift allowances and PETs over time; ensuring both spouses’ nil rate bands and residence nil rate bands are claimed; leaving at least 10% of the net estate to charity to qualify for the reduced 36% rate; considering the role of discretionary trusts for assets you wish to retain some control over; and exploring business property relief or agricultural property relief where relevant assets are held. The nil rate band has remained frozen at £325,000 since 2009, while property values have risen substantially — meaning more estates are drawn into IHT each year. Early, structured planning typically offers more options than arrangements made close to death. Our team is happy to provide a free initial consultation to help you understand which strategies may be relevant to your circumstances.