Inheritance tax planning, so more passes to your family
Inheritance tax is charged at 40% on the part of an estate above the available allowances. With planning, it can often be reduced.
Everyone has a nil-rate band of £325,000, and a residence nil-rate band of up to £175,000 can apply when your home passes to your children or grandchildren. Married couples and civil partners can pass unused allowances to each other. Above those allowances, the estate pays 40%.
The rules have changed for business owners and families. Business and agricultural property relief were restricted from April 2026, and from April 2027 most unused pension funds count towards your estate. Plans that worked a few years ago may need another look.
We look at your whole position, including your business, property, pensions and gifts, and work with your solicitor and financial adviser so your will and your plan fit together.
- 1We map your estate and estimate the tax today
- 2We discuss what you want to happen, and when
- 3We recommend a plan
- 4We work with your solicitor and adviser to put it in place
- 5We document everything
- 6We review the plan as the rules and your life change
Who benefits, and how
Inheritance tax planning is about the people who come after you as much as the tax. A plan made in good time gives your family certainty, keeps the business or the land together, and avoids hurried decisions after a death.
Business owners
- From 6 April 2026, 100% business property relief applies to the first £2.5 million of qualifying business and agricultural property. Above that, relief is 50%. We check where your shares and business assets sit against that limit.
- Shares on AIM and similar markets now get 50% relief, not 100%. If you hold them for inheritance tax reasons, the plan needs another look.
- A business that mainly holds investments or property, rather than trading, does not qualify for business relief at all. We look at how your company is set up and what it holds.
- Your succession plan, whether that is a sale, a management buy-out, an Employee Ownership Trust or a handover to family, changes what your estate holds and the tax on it. We plan the two together.
Families and the people inheriting
- A clear picture of what the estate is likely to pay, and who pays it, before anyone has to find the money.
- The residence nil-rate band only applies if your home passes to your children or grandchildren, and it is reduced for estates worth more than £2 million. The wording of your will matters.
- From April 2027, executors become responsible for any inheritance tax on unused pension funds. Knowing where the pensions are, and who they go to, makes their job far easier.
- Gifts made now, and recorded properly, can reduce the estate while you are here to see them used.
Farmers, landowners and property-rich families
- Agricultural property relief shares the same £2.5 million allowance as business relief from 6 April 2026, so farms with significant land and machinery need a fresh valuation and plan.
- Inheritance tax on property that qualifies for agricultural or business relief can now be paid in ten equal yearly instalments, interest-free. That can avoid a forced sale.
- Let residential property is usually an investment, not a business, so it does not attract business relief. Planning for a rental portfolio relies on gifts, trusts and the order in which assets pass.
The main ways to reduce inheritance tax
Most plans use more than one of these. The right mix depends on what you own, what you need to live on, and how much control you want to keep.
Lifetime gifts
Giving assets away during your life, so they leave your estate.
- Suits
- People who can afford to give without affecting their own standard of living.
- How it works
- Most gifts to individuals are free of inheritance tax if you live for seven years after making them. Some gifts are exempt straight away, such as £3,000 a year and regular gifts out of surplus income.
- Watch out for
- Gifts you keep benefiting from, such as a house you still live in, stay in your estate. Gifts of property or shares can also trigger capital gains tax now.
Trusts
Moving assets out of your estate while trustees control how they are used.
- Suits
- Families who want to provide for children or grandchildren without handing over assets outright, or to protect them.
- How it works
- Assets put into most trusts are taxed at 20% on any value above your available nil-rate band at the time. Trusts have their own periodic charges every ten years and when assets leave.
- Watch out for
- The ongoing administration, the trust's own tax returns, and registering the trust with HMRC. A trust needs to earn its place.
Business and agricultural property relief
Relief for trading businesses, unlisted shares and farmland that you own at death or give away.
- Suits
- Owners of trading companies, partnerships and farms.
- How it works
- From 6 April 2026, 100% relief on the first £2.5 million of qualifying property and 50% above that. Any unused allowance can pass to a surviving spouse or civil partner. Business assets usually need to have been owned for two years.
- Watch out for
- Investment activity inside a trading company, cash built up beyond business needs, and AIM shares, which now get 50% relief only.
Pensions and life insurance
Planning how pension funds pass on, and insuring against the tax that remains.
- Suits
- Anyone with significant pension savings, or an estate that will still pay tax after other planning.
- How it works
- From 6 April 2027, most unused pension funds count towards your estate. A life policy written in trust can pay out outside the estate, to fund the tax that is due.
- Watch out for
- Pension benefits left to a spouse or civil partner stay exempt, but other beneficiaries may pay both inheritance tax and income tax on the same fund.
Rates and allowances are those in force for 2026/27. The nil-rate band of £325,000 and the residence nil-rate band of £175,000 are fixed until 5 April 2031. Pensions and life insurance are regulated products: we work with your financial adviser on these.
The April 2026 changes to business and agricultural relief
Until April 2026, qualifying trading businesses, unlisted shares and farmland could usually pass free of inheritance tax, whatever their value. For deaths and gifts on or after 6 April 2026, 100% relief is limited to a combined £2.5 million of business and agricultural property for each person. Value above that gets 50% relief.
Any part of the £2.5 million allowance that is not used on the first death can pass to a surviving spouse or civil partner. If the first death was before 6 April 2026, the full allowance is treated as available to transfer. Trusts holding business or agricultural property have their own allowance.
- Shares on markets that HMRC does not treat as listed, such as AIM, now get 50% relief in all cases.
- The tax on business and agricultural property can be paid over ten years in equal instalments, interest-free.
- Wills that leave business assets to a discretionary trust, or to the children on the first death, should be reviewed against the new allowance.
Pensions in the estate from April 2027
Most unused pension funds and pension death benefits have been outside your estate for inheritance tax. For deaths on or after 6 April 2027, that changes, and they will count towards the estate. Death in service benefits from a registered pension scheme stay outside, and pension funds left to a spouse or civil partner remain exempt.
Your executors, not the pension scheme, will be responsible for reporting and paying the tax. For many people, drawing on the pension last and keeping it for the family no longer works as it did. We look at the order in which you use your savings, alongside your financial adviser.
Gifts out of surplus income
One of the most useful exemptions is also one of the least used. Regular gifts are exempt from inheritance tax straight away, with no seven-year wait and no upper limit, if they meet three conditions.
- They form part of your normal pattern of spending, such as a regular payment to a child or into a grandchild's savings.
- They come out of income, not capital.
- After making them, you still have enough income to keep up your usual standard of living.
- The exemption has to be claimed by your executors, so keeping a simple yearly record of income, spending and gifts makes the claim far stronger. We help you set that up.
Questions we’re often asked
What happens if I die within seven years of making a gift?
The gift is added back to your estate. If your gifts in the seven years before death are more than the nil-rate band, taper relief reduces the tax on those made more than three years before death, on a sliding scale.
Can my spouse or civil partner use my allowances?
Yes. Anything you leave to a spouse or civil partner is normally exempt, and any unused nil-rate band, residence nil-rate band and, from April 2026, unused business and agricultural relief allowance can be added to theirs on the second death.
Does leaving money to charity reduce the tax?
Gifts to charity are exempt. If at least 10% of the net estate goes to charity, the rest of the estate can pay inheritance tax at 36% instead of 40%.
Do I need a solicitor and a financial adviser as well?
Usually, yes. We work out the tax and design the plan; your solicitor drafts the will and any trust, and your financial adviser handles pensions, investments and insurance. We work with yours, or can introduce them.
Rules and limits checked 9 October 2026.
Talk to us about your tax.
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