Inheritance Tax (IHT) can affect more estates as property and asset values rise while key thresholds remain frozen. Generally, IHT is charged at 40% on estate value above the £325,000 nil-rate band, although gifts between spouses are usually exempt. With more than half of UK adults reportedly lacking a will and many unsure how IHT works, early planning can help protect the value passed to beneficiaries.
Couples may be able to combine unused allowances, potentially passing up to £1 million to children or grandchildren free of IHT where the available nil-rate bands and residence nil-rate bands apply. The factsheet also explains important limits, including the reduction of the residence allowance for larger estates and the different treatment of unmarried couples.
From 6 April 2027, most unused pension funds and death benefits are also expected to fall within the estate for IHT, making pension planning increasingly important.
The guide outlines practical ways to reduce exposure, including annual gift exemptions, wedding gifts, small gifts, regular gifts made from surplus income and charitable giving. Most outright lifetime gifts can fall outside the estate if the donor survives seven years, while trusts may offer a controlled way to transfer assets, subject to detailed tax rules. Accurate records of every gift are essential.
Recent changes to business and agricultural property relief mean some business owners and farming families may face greater IHT exposure from April 2026. An up-to-date will, a clear understanding of asset values and tailored advice can help ensure plans reflect both family wishes and the changing rules.
Download the full PDF factsheet to read the detailed rules, allowances, reliefs and planning considerations.
