Inheritance tax (IHT) can take a significant share of your estate if you don’t plan ahead. With thresholds frozen and more families being drawn into the tax net, early planning is key.
The good news? There are several straightforward ways to reduce — and sometimes avoid — inheritance tax altogether.
Start with the tax-free allowances
For 2025/26, every individual gets:
- £325,000 nil-rate band (tax-free)
- £175,000 residence allowance when passing a home to children or grandchildren
Together, this means:
- Up to £500,000 per person is tax-free
- Up to £1 million for couples when planning is combined Anything above this is typically taxed at 40%, so using these allowances properly is essential
Use the spouse exemption
One of the most powerful reliefs available:
- Transfers between spouses or civil partners are generally free of IHT
- Any unused allowances can be passed on to the survivor
This is why many estates only face IHT after the second death — making long-term planning critical.
Make gifts early
Giving assets away during your lifetime is one of the most effective strategies:
- You can give £3,000 each year tax-free
- Small gifts and wedding gifts are also exempt
- Larger gifts become tax-free if you survive 7 years
Used properly, gifting can significantly reduce the size of your estate over time.
Consider wider planning options
Families with larger estates often look at:
- Trusts to control how wealth is passed on
- Business or agricultural reliefs (where applicable)
- Charitable giving (which can also reduce the tax rate)
These strategies require careful structuring but can make a substantial difference.
Don’t leave it too late
Inheritance tax planning works best when it starts early. Waiting until later in life can limit your options — particularly for gifting and long-term structures.
Get practical guidance for your family
Inheritance tax rules are complex, but with the right support you can take control and protect your family’s wealth.
Explore our range of practical IHT resources:
Final thought
Inheritance tax is often avoidable — but only with the right planning. By using allowances, making gifts, and structuring your estate carefully, you can ensure more of your wealth goes to your family, not the taxman.
