Inheritance Tax Planning

Inheritance Tax liability arises after death, so your will and the way your final affairs are handled are intrinsic in how much liability arises. A testator (the person who makes the will) has the freedom to leave their money and property to whomever they like. There are also many tax reliefs and exemptions available depending on the circumstances.

For example:

• Anything you leave to your spouse or civil partner (but not your unmarried partner) is free of Inheritance Tax. You can also transfer any unused nil-rate band (currently £325,000) to your spouse or civil partner.
• You can get additional relief through the residence nil-rate band if you leave your home to your children or grandchildren, and any unused residence nil-rate band can be passed on to your spouse or civil partner.
• Anything you leave to charity or a community amateur sports club is free of Inheritance Tax. If you leave at least 10% of the net value of your estate to charity, the Inheritance Tax rate on the rest of your estate can be reduced from 40% to 36%.

These are some of the general rules. It is important to seek our advice about how you could use your will to reduce your Inheritance Tax liability in your particular circumstances. We can provide bespoke advice and draft your will on your behalf, ensuring it is valid and fully reflects your wishes.

Read more about making a will here.

Trusts are affected by tax differently and can be a useful part of Inheritance Tax planning if set up correctly. A trust is a legal instrument that allows you to put aside money or property for the benefit of someone else. The trust property is looked after (and legally owned) by chosen trustees who are legally required to hold and manage the property for your chosen beneficiaries.

The classic example is grandparents who set up a trust fund for a grandchild to become entitled to once they turn 18 years old. However, you can have all sorts of trusts for all sorts of reasons – for example, to set aside money for vulnerable family members, or to leave money to a group of potential beneficiaries (a discretionary trust).

Depending on the circumstances, a trust may itself have to pay some Inheritance Tax, and trusts are also affected by other taxes such as Income Tax and Capital Gains Tax. It is therefore vital to seek both legal advice and the advice of a specialist tax professional.

We can handle a wide range of trust matters, including:

• Advising on the different types of trusts
• Setting up trusts
• Managing and administering trusts
• Advising trustees and beneficiaries
• Acting as professional trustees

Read more about trusts here.

Gifts that you give during your lifetime may be exempt from Inheritance Tax – they are referred to as 'potentially exempt transfers'.

If you survive for seven years after giving the gift, it is not counted for Inheritance Tax purposes. If you die within seven years of giving the gift, it may be taxed, though 'taper relief' can reduce the tax on gifts made more than three years before death: gifts made within three years of death are taxed at the full 40%, reducing to 32% for gifts made three to four years before death, and continuing to reduce until the seven-year point. Taper relief applies to the tax on gifts that exceed the nil-rate band.

There are other rules and allowances which affect lifetime gifts, including annual and small-gift exemptions. We can talk you through your options and how your estate and beneficiaries may be affected, and help you plan accordingly to provide you and your family with as much certainty as possible.

We have specialist expertise advising business owners about estate planning, including reducing liability for Inheritance Tax. Business Property Relief can significantly reduce the tax on qualifying business assets. Following reforms that took effect on 6 April 2026, 100% relief applies to the first £2.5 million of combined qualifying business and agricultural property, with relief reduced to 50% above that level (an effective 20% Inheritance Tax rate). Because these rules were recently reformed and are complex, we work alongside your accountant or tax adviser to make your business succession as tax-efficient as possible.

Estate planning is important for everyone, but it is particularly vital for farming families and agricultural business owners.

Agribusinesses are unique in that they are often family-run, in many cases with the farm and its assets being passed from parent to child over many generations. It is vital to plan for the future to ensure that your wishes come into fruition and that everyone is aware of their rights and responsibilities.

We have acted as trusted legal advisers for farming families and businesses for many years. Our agricultural law solicitors can provide guidance on all farming succession planning matters, including making wills and structuring farming estates.

Agricultural Property Relief can allow qualifying agricultural property to pass with valuable relief from Inheritance Tax. Following the reforms from 6 April 2026, 100% relief applies to the first £2.5 million of combined agricultural and business property, with 50% relief above that level. Careful planning is therefore more important than ever, and we can advise on agricultural property relief and all other options for making your estate as tax-efficient as possible.

Read more about our agricultural law expertise here.

The current nil-rate band for Inheritance Tax in the UK is £325,000. Estates valued above this amount are generally subject to a 40% tax rate on the excess. However, if you leave your home to your children or grandchildren, the residence nil-rate band can raise your threshold to £500,000. Married couples and civil partners can combine their thresholds, potentially allowing up to £1 million to be passed on tax-free.

There are several reliefs and exemptions available to reduce Inheritance Tax liability:

• Business Property Relief: Qualifying business assets can attract relief from Inheritance Tax – 100% on the first £2.5 million of combined business and agricultural property from 6 April 2026, and 50% above that level.
• Agricultural Property Relief: Qualifying agricultural property draws on the same combined £2.5 million allowance (100% below, 50% above) from 6 April 2026.
• Charitable Donations: Leaving at least 10% of your net estate to charity can reduce the Inheritance Tax rate on the rest of your estate from 40% to 36%.
• Spouse or civil partner exemption: Transfers between spouses and civil partners are generally free of Inheritance Tax.

Valuing an estate for Inheritance Tax purposes involves calculating the total value of all assets, including property, money, and possessions, and deducting any debts and liabilities. It's important to get an accurate valuation to ensure the correct amount of tax is paid and to avoid any penalties.

Probate is the legal process of administering a deceased person's estate. If the estate is subject to Inheritance Tax, you will usually need to deal with the tax before a grant of probate is issued. This involves submitting the required forms to HM Revenue and Customs (HMRC) and paying any Inheritance Tax due. Our solicitors can guide you through the probate process and help ensure all legal requirements are met.

Everyone has a tax-free 'nil-rate band' of £325,000. If you leave your home to your children or grandchildren, an additional 'residence nil-rate band' of up to £175,000 can apply, raising your threshold to £500,000. Married couples and civil partners can combine their allowances, potentially passing on up to £1 million tax-free. Anything above the available threshold is generally taxed at 40%.

There are many legitimate ways to reduce inheritance tax, including leaving assets to a spouse or civil partner (which is exempt), using the residence nil-rate band, making lifetime gifts (which fall outside your estate if you survive seven years), leaving at least 10% of your estate to charity (which cuts the rate on the rest from 40% to 36%), using trusts, and claiming business or agricultural property relief where available. The right approach depends on your circumstances, and we often work alongside your accountant or financial adviser.

Gifts you make during your lifetime are usually free from inheritance tax if you survive for seven years after making them (known as 'potentially exempt transfers'). If you die within seven years, the gift may be taxed, but 'taper relief' can reduce the tax on gifts made more than three years before death. There are also separate annual and small-gift allowances that are immediately exempt.

Yes. Solicitors advise on the legal side of inheritance tax planning – drafting tax-efficient wills, setting up and managing trusts, and structuring your estate. This often works best alongside a financial adviser or accountant who handles investments and financial products, and we are happy to work with your existing advisers or refer you to trusted local professionals.