Working with a financial adviser for inheritance tax planning can offer valuable support to help you secure your legacy with the utmost confidence.

What is inheritance tax?

Inheritance Tax (IHT) is a tax on everything you own (also known as your ‘estate’) after you pass. Things that make up your estate include your possessions, money, and assets such as property or vehicles. If the value of an estate exceeds the available tax-free thresholds, Inheritance Tax must be paid to HMRC at a rate of 40%.

When IHT was first introduced, it was intended to target only the very wealthy. But with property prices having risen significantly over recent decades, more and more people are finding their estate value now exceeds the available inheritance tax free bands.

Important - Bear in mind that tax rules can change and their impact on you will depend on your circumstances. The FCA does not regulate inheritance tax and estate planning.

Understanding inheritance tax thresholds

Nil-rate band

The nil-rate band serves as a personal inheritance tax allowance. This means that each person subject to potential IHT has their own allowance of £325,000, and an IHT liability only arises if their estate value, and gifts in the last seven years before death, exceeds that amount.

If you're married or in a civil partnership

If you leave all your assets to your husband, wife or registered civil partner, there's usually no need to pay any inheritance tax. This means that the individual who has passed away will not be utilising their nil-rate band at all, allowing the surviving partner to effectively double theirs because the two nil-rate bands will be added together, totalling £650,000. 

Residence nil-rate band

If your children or grandchildren inherit your home, or an equivalent amount from the estate, an additional threshold of £175,000 is available. This is added to the existing nil-rate band of £325,000, thus allowing an estate to potentially be worth up to £500,000. If your taxable estate is valued above this amount, then 40% inheritance tax will be paid on everything above the threshold.

It is important to note if your estate value is more than £2 million, the residence nil-rate band is tapered. This means estates worth over £2 million will start to lose the residence nil-rate band (RNRB), as it will be withdrawn at a rate of £1 for every £2 over £2 million. On the other hand, if the property in the estate is worth less than the residence nil-rate band threshold, the relief is limited.

Like the nil-rate band, any unused portion of the residence nil-rate band can be passed on to a surviving spouse or civil partner.

Reducing your inheritance tax liability

Inheritance tax can significantly hinder the transfer of wealth from one generation to the next. However, several strategies, like the examples below, can be used to reduce or even eliminate this tax, resulting in more of your assets being transferred to your loved ones. But it's important to remember that everyone's financial circumstances are unique. Seeking the advice of a financial adviser can help you determine the best course of action to minimise your inheritance tax liability.


Regular gifting within annual exemptions is a great way to gradually transfer your wealth to your loved ones while reducing the possibility of a hefty tax bill. Larger gifts can be made, however, there are rules and limits to gifting, and seeking the advice of a financial adviser can help navigate these complexities.

IHT investment reliefs

Certain investments qualify for reliefs, which can help reduce your Inheritance Tax exposure. By taking advantage of these reliefs, you can make strategic investments that benefit your portfolio and help protect your estate. A financial adviser can help you find suitable investments that fit your needs and help you achieve your financial goals.


A trust can allow a gift of assets or cash (or both) to be made and can be set up to enable you to retain a right to income, capital, or both. Lifetime gifts to trusts can trigger lifetime inheritance tax charges, so the help of a financial adviser is key. Trusts are a flexible and useful tool in IHT planning.

Life assurance plan

Consider insuring some or all of your inheritance tax liability through a life assurance plan. It can provide added security and peace of mind for you and your loved ones and can be helpful to your estate personal representatives, providing them with the funds to meet the liability so probate can be dealt with.

Charitable donations

If the value of your estate exceeds the bands and reliefs, IHT is charged at 40%.  The rate can reduce to 36% if 10% or more of the ‘net value’ of an estate is left to a qualifying charity.

Important - Investment involves risk. The value of investments can fall as well as rise. You may get back less than you originally invested.

Benefits of inheritance tax and estate planning with Ascot Lloyd

We’re independent

Being an independent financial advisory firm means we are not tied into certain partnerships or product solutions; therefore, we can search the whole market to find the most appropriate tax efficient solutions such as pensions and investments that qualify for reliefs. On the other hand, restricted advisers can only recommend products from a specific group of providers or a single company, which can limit the options available to clients.

We take time to get to know you

We value the importance of getting to know you and will take the time to fully understand your personal, family and business objectives and life goals. As we discuss these objectives in greater detail, we will review your attitude towards risk to ensure any future solutions meet your expectations.

Highly experienced advisers and support team

We have in-house tax specialists who support our advisers as well as access to a nationwide network of legal experts, ensuring that all aspects of your inheritance tax and estate planning are covered.

Latest software and analysis tools

We use the latest tools and technologies to provide our clients with the best possible service, for example we use cashflow modelling to demonstrate how your assets can support you in the long term, while effectively mitigating any potential inheritance tax liabilities.

Ongoing support

Once you start your journey with Ascot Lloyd, we understand how crucial it is to have a financial plan that can adapt to your evolving needs and meet your expectations. This is to ensure that your plan remains on track and your financial solutions are still the most appropriate.

Get expert financial advice on inheritance tax and estate planning today

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Frequently asked questions
about inheritance tax

How can I avoid paying inheritance tax?

A range of techniques are available to make a substantial difference to your IHT liability. These range from making gifts and establishing a trust to more complex methods. A good financial planning strategy will combine the measures most appropriate to your estate, circumstances and objectives, ensuring as much of your wealth as possible is distributed as per your wishes. Taking a long-term view to IHT planning is essential to ensure you maximise the benefits of the various reliefs and exemptions available.

Do I have to pay inheritance tax on my parents’ house?

It depends on the value of the house and the overall estate. When you inherit a main-residence property from your parents, there is an additional IHT threshold to the £325,000. This extra threshold, which is linked to the property, is currently £175,000. Again this can be passed onto a spouse or civil partner, meaning up to £1 million could be passed down by a married couple with property. The main residence threshold does, however, reduce by £1 for every £2 that the deceased’s net estate exceeds £2 million.

Important - This website is for information purposes only and is based on our understanding of current UK tax legislation and HM Revenue and Customs (“HMRC”). Levels and bases of taxation and reliefs are subject to change and their value to you will depend on your personal circumstances. Nothing in this website constitutes financial, professional or investment advice or a personal recommendation. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.