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Inheritance Tax Planning

Inheritance Tax is now becoming a real issue for many more families. This is reflected in that Government receipts of IHT are expected to be at £4.9bilion in 2017, more than double that of less than 10 years ago.

Reducing your Inheritance Tax liability is an important consideration if you want to pass on your wealth to family members. We can help you develop a long-term plan designed to ensure that you maintain your present day financial security, whilst at the same time enabling your estate to be passed on according to your wishes in a tax-efficient manner. Below we have tried to highlight a typical scenario facing many of our clients today.

what is my Inheritance Tax allowance?

The Inheritance Tax Allowance (Nil Rate Band)  is the value of an estate that is not subject to Inheritance Tax in the United Kingdom and stands at £325,000 per individual.

There is an additional Nil Rate Band available when a residence is passed on death to a direct descendant.  This is currently £125,000 per individual in the 2018-19 tax year.


In the scenario below, we have used an example of a husband and wife living in Bristol, with their two children.  Their total estate comprising of their house, a buy to let property, cash and savings could, with careful planning, minimise the exposure in the following way. 

Please note that the following should be used for information purposes and not be interpreted as financial advice.




Residential property
worth £900,000

Gifting through carefully drafted will to include suitable trusts

rental property
worth £300,000

Gift rental property and rental income generated to the children (subject to 7 year taper rule)

CAsh Savings

Potentially transfer to IHT friendly investment


Invest in a suitable insurance policy and trust to cover remaining IHT liability

potential iht allowance £900,000

Grand total £1,350,000

£450,000 over inheritance tax limit. They may incur an inheritance tax bill of £180,000 @ 40% tax rate


Taxable estate greatly reduced in value. Any remaining tax can be paid by the insurance policy 

Also own £1,000,000 of pensions (not subject to IHT)


There is a lot to consider when proposing a solution to minimise your inheritance tax exposure. Below is a list of common solutions found and their advantages and disadvantages.



Gift your assets or investments to your children and/or grandchildren. 


Allows the beneficiaries to receive gift immediately

You lose the benefit and control of these assets since it needs to be an absolute gift without any consideration

Will use up some or all of your nil rate band for the following 7 years unless an exempt gift



Make use of trusts to enable your family to benefit in the future and reduce your IHT liability


Enables you to retain some control over the assets / investments / beneficiaries by being a trustee yourself

Can be complicated, expensive to establish and administer



Taking out an insurance policy and paying a monthly premium now can provide a guaranteed lump sum, upon your death, which can be used to pay the IHT bill.


Simple and provides ability to pay bill without touching your estate

Can be cost prohibitive for elderly clients, so needs to be feasible based on the ongoing cost versus the benefit




Back to estate planning




Establishing trusts are an efficient way of making future provisions for your family. You could for example set up individual trusts for your own children, plus grandchildren. Any money placed within a trust falls outside your estate after 7 years, so is therefore not liable for Inheritance Tax.   There can be lifetime inheritance tax charges depending on the amounts gifted and the type of trust

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Making a will

Having a current and valid will is an important part of estate planning since it allows you to decide how your money, property and possessions are divided upon your death. With the help of a solicitor we can ensure your estate is passed on in the most tax-efficent manner.

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41 North View,

Westbury Park,

Bristol BS6 7PY

0117 907 1965