Inheritance tax (IHT) is becoming an increasing concern for many UK families. With the nil-rate band of £325,000 and the residence nil-rate band of £175,000 frozen until 2030, more estates are being caught in the tax net due to rising property values. According to HMRC data, IHT receipts have surged to £8.2 billion from April 2024 to March 2025. That means middle-income households now face tax bills once reserved for the wealthiest.
Know Your Liabilities Early
The first step to minimise inheritance tax is to understand what your estate includes and how much tax may be owed. Pensions, from 2027, may also fall within IHT rules, so forward-thinking planning is key. At Care Accountancy, we offer tailored tax planning services to help you understand and prepare for your liabilities.
Trusts Can Reduce Tax Exposure
Setting up a trust, especially for life insurance policies, can help remove those assets from your estate. When placed in trust, the payout goes directly to beneficiaries without adding to your IHT bill. It’s a practical solution that also avoids probate delays. Trust planning is one of our specialist services at Care Accountancy.
Stay on Top of Your Financial Records
An up-to-date will, clear documentation of financial assets, and smart use of exemptions like spousal transfers and gifting rules can go a long way. Make sure to keep detailed records of gifts and financial decisions. Not only does this reduce future disputes, but it simplifies tax assessments.
Gifting Wisely Can Save Thousands
Each individual can give away £3,000 per year tax-free. If unused, last year’s exemption can also be carried forward. Additionally, regular gifts from surplus income aren’t subject to IHT, provided they don’t reduce your standard of living. Grandparents, for instance, might consider gifting into a Junior SIPP for long-term tax-efficient family planning.
Tax-Efficient Investments are Worth Exploring
Investing in Business Property Relief (BPR) qualifying companies or Enterprise Investment Schemes (EIS) can significantly reduce IHT liabilities. These are specialist investments and should only be made with expert advice. Octopus Investments and Downing are examples of providers offering BPR-based services.
Sometimes the Best Strategy is to Spend
It might sound counterintuitive but using your wealth while you’re alive is also an effective way to minimise inheritance tax. Investing in shared family experiences or supporting your children with house deposits or education fees now means your money has an impact and avoids tax later.
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