Inheritance tax in the UK – how to protect your family’s wealth

Melanie Richardson


In the United Kingdom, inheritance tax (IHT) is a topic that often concerns individuals and families. It's the tax levied on the estate of a deceased person and it can significantly reduce the what you pass on to your loved ones.  However, there are strategies and measures you can take to protect your family's wealth from excessive IHT.  In this article, we'll explore key considerations and steps to safeguard your assets and reduce the burden of inheritance tax.

Understand your IHT threshold

Every individual has a tax free allowance known as the nil rate band. The nil rate band is currently £325,000. This means that estates valued below this threshold are not subject to inheritance tax.  If all of your estate is passed on to your spouse or civil partner, then you might not have any IHT to pay at all.  When your partner dies, their estate would benefit from both nil rate bands.

Consider the residence nil rate band (RNRB)

In addition to the normal nil rate band, the RNRB adds up to £350,000 to the normal nil rate band when your partner dies.  Rules around this can be complicated and so it is advisable to check the position with a professional adviser.

Lifetime gifting

One effective way to reduce your potential IHT liability is through lifetime gifting. Gifting assets to your heirs while you are still alive, can help reduce the overall value of your estate subject to tax. Various gifting allowances and exemptions are available, such as the annual gift allowance, which allows you to give a set amount to individuals tax-free each year.

Have a will

Having a well structured and legally sound will is an essential part of the strategy to make sure that your assets are distributed in a tax efficient manner, while adhering to your wishes.

Establish a trust

Trusts can be valuable tools as part of your IHT planning.  They can allow you to control and protect your assets, while providing for your beneficiaries.  Certain trusts can help reduce the value of your estate for tax purposes. Go to our resources page where you can find an ‘Introduction to trusts’ guide.

Seek professional advice

Navigating the complexities of inheritance tax planning requires professional expertise. Consult with an adviser who specialises in estate planning and IHT. They can provide personalised guidance based on your financial situation and goals.

Review and update your plans

It's crucial to review your estate planning strategies on a regular basis, especially when there are changes in your financial situation, family circumstances or tax laws. What may have been an effective strategy in the past might need adjustments to remain relevant.

Inheritance tax planning is vital in preserving your family's wealth and ensuring that your assets benefit your loved ones as intended. By understanding the various allowances, exemptions and planning strategies available, you can take proactive steps to minimise the impact of inheritance tax on your estate. Consulting with professionals and regularly reviewing your plans will help you protect your family's financial future.

If you have any questions about inheritance tax please get in touch with your Swindells partner who will be able to advise you further

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