When it comes to financial planning, one thing that often gets pushed to the bottom of the list is inheritance tax planning. It’s understandable—no one enjoys thinking about the end of their life. But taking action now can make a significant difference for your loved ones in the future.
Why Planning Ahead Matters
Inheritance tax (IHT) can take a significant chunk out of the wealth you intend to pass on to your beneficiaries. Without the right planning in place, your family could end up paying a large tax bill that could have been minimized—or even avoided—through smart financial strategies.
By thinking ahead, you ensure that more of your hard-earned wealth stays with your loved ones rather than being lost to tax. But it’s not just about the money—it’s about peace of mind. Knowing that you’ve put everything in order can remove unnecessary stress and pressure from your family during an already difficult time.
How Inheritance Tax Works
In the UK, inheritance tax is currently charged at 40% on estates valued above the nil-rate band, which is currently set at £325,000 per individual. There are certain allowances and exemptions—such as the residence nil-rate band (RNRB) for passing on a family home—but without careful planning, many estates end up paying more tax than necessary.
The Benefits of Planning Early
- Maximizing Tax Allowances – The sooner you start planning, the better you can take advantage of exemptions, reliefs, and gifting allowances.
- Reducing the Tax Burden – Strategies like gifting assets, setting up trusts, or making charitable donations can significantly reduce the taxable value of your estate.
- Protecting Family Wealth – Planning ahead ensures that your loved ones benefit fully from your estate without unnecessary deductions.
- Minimizing Stress for Your Family – Dealing with finances after losing a loved one is tough. Having everything in place will make the process much smoother and less overwhelming.
Steps You Can Take Now
- Assess Your Estate – Get a clear picture of your assets and their total value.
- Understand Your Tax Liability – Work out whether your estate will be subject to inheritance tax and what exemptions might apply.
- Make Use of Gifting Allowances – You can give away up to £3,000 per year tax-free, plus other gifts depending on circumstances.
- Consider Setting Up a Trust – Trusts can help manage assets efficiently and reduce the impact of IHT.
- Get Professional Advice – An estate planning specialist can help you put the best plan in place to minimize your tax liability.
Final Thoughts
It’s never too early to start thinking about inheritance tax planning. The sooner you take action, the more options you have to protect your wealth and ease the burden on your family. While it may not be the most comfortable topic to discuss, it’s one of the most important financial decisions you’ll ever make.
So why wait? Take control of your estate today and give your loved ones the financial security they deserve.
Inheritance Tax Planning is not regulated by the Financial Conduct Authority.
Approver Quilter Financial Services Ltd and Quilter Mortgage Planning Ltd March 2025