Tax & Estate Planning

Inheritance tax (IHT) is a tax payable on a person’s estate (their money, property and other assets) when they die. Lifetime IHT charges may arise if a person puts assets into a trust above a certain value.

Inheritance tax isn’t payable when you pass your estate to a husband, wife or civil partner, or to charity, when you die. Otherwise, IHT is only payable when your estate (including the value of your undrawn pension) is worth more than £325,000. There is an additional allowance of up to £175,000 if you leave your home to your children or grandchildren (if you have them). The allowances can be transferred between spouses and civil partners. This means that on the death of the second partner there could be a total tax-free allowance of £1m. The standard IHT rate is 40% and only charged on the part of your estate that’s above the combined allowances.

Inheritance tax is payable on the net value of a person’s estate. Their executor — the person who deals with the estate — will pay it from the assets within the estate. Any inheritance tax due on your pension will be paid by the pension provider directly to HMRC.

IHT isn’t usually charged on the beneficiaries of an estate. People who have received a gift during the lifetime of the person who has died may have to pay IHT but only if the person who makes the gift gives away more than £325,000 and dies within seven years of making the gift.

Assets that you gift to your spouse — whether on death or in your lifetime — will pass free of inheritance tax.

Thanks to Business Relief, inheritance tax on business assets is currently payable at 0%. However, from 6 April 2026 the rate will be 20% above a tax-free threshold of £1m. 

The business must be a trading business, not an investment company. A similar relief called Agricultural Relief can apply to farm property. 

It’s important to plan ahead to ensure that your business assets qualify for business relief and the relief isn’t wasted when considering business succession. It's important that business owners proactively plan for succession of the business, as many would struggle to find the IHT due on their business interests on death and this could impact the viability of the business.

Planning for inheritance tax can involve several strategies to legally minimise the amount of tax due on your estate, including having an up-to-date Will, making use of allowances and exemptions, lifetime gifting and trusts. The specifics of IHT can be complex, and vary depending on personal circumstances, so it’s strongly advisable to seek professional advice.

Our team contains STEP (Society of Trust and Estate Practitioners) qualified specialists in dealing with inheritance tax who can assist with calculating your potential IHT liability and advise on ways to mitigate it. We help executors with calculating IHT when someone has died, as well as calculating IHT on trusts.

The rules are the same for civil partners as for married couples, so you don’t have to pay inheritance tax (IHT) when you leave assets to each other on death or in your lifetime.

If you die before 6 April 2027, your pension can pass IHT-free to your nominated beneficiaries, although other taxes may be due on withdrawals if you're 75 or over when you die.

If you die on or after 6 April 2027, IHT will be due on the value of your pension. This may affect your qualification for the Residence Nil Rate Band, depending on the figure involved.